Gold Price Forecast: Bulls filling in the wick, eyes on $1,830s

• Gold prices are holding in bullish territory as the New York session progresses. 
• Bulls are in charge and target the $1,830s on the approach to Friday's closing high near $1,816.
• XAU/USD bears and bulls fight over $1,800, focus shifts to US GDP

The price of gold has started out the week on the front foot as bulls attack territory towards the highs of Friday's business near to $1,814. At the time of writing, XAG/USD is trading at $1,806 and 0.75% higher on the day. The price of gold has travelled from a low of $1,792.28 to a high of $1,810.07 so far. 

The US dollar rose from a one-month low in mid-Asian session as investors looked ahead to central bank meetings and economic data coming later this week. The greenback catches a bid when the concentration is focussed on the Federal Reserve and prospects of a tighter US monetary policy. The risk events this week are heavy which tend to support flows into the greenback as investors position for uncertainty. 

Inflation concerns fueling bid in gold

The dollar index DXY was up nearly 0.4 at 93.964 for the day after having fallen to a low of 93.484 which was a one month low following comments on Friday from Federal Reserve Chair Jerome Powell that affirmed plans to cut back on bond purchases.

The 10-year US Treasury rose at the start of the week in Asia to a high of 1.673% whereby the US dollar was supported. However, there has been a turn of trajectory in New York trade and the yield has slipped below the prior day's close and is down some 0.18% at the time of writing which would be expected to give support to the price of gold. 

''Inflation concerns are fueling a push higher in gold,'' analysts at TD Securities explained. ''Investors are cautious about the yellow metal as they remain intensely focused on pricing the Fed's exit,'' the analysts explained further. 

''Yet, we argue that market pricing for Fed hikes remains far too hawkish, as it fails to consider that a rise in inflation tied to a potential energy shock and lingering supply chain shortages would be unlikely to elicit a Fed response,''

''Reasons to own the yellow metal are growing more compelling as Fed pricing is likely to unwind. In this context, gold prices are tremendously underperforming against historical analogs, but a breakout in the yellow metal from its multi-month downtrend could signal that inflation-hedging flows are finally trumping the speculative exodus tied to Fed pricing,'' the analysts concluded. 

ECB vs Fed meetings in focus

Meanwhile, the key data points for the week will be with US Gross Domestic Product and PCE as well as the European Central Bank.  In this regard, outcomes will impact the US dollar and therefore gold prices will be vulnerable also. As for the ECB, this is a major risk event for markets given the move higher in yields in recent weeks has presented a challenge for the central bank.

''The October ECB meeting was supposed to be a boring one, but given risen market expectations, now the ECB needs to emphasize its forward guidance. We expect a slightly dovish market reaction to the ECB’s message on Thursday,'' analysts at Nordea argued. 

Key points

The analysts at Nordea offered a number of key points ahead of the meeting that takes place later this week on Thursday:

• Previous ECB comments have failed to change market pricing much, and we expect Lagarde to try to emphasize the ECB’s dovish guidance on rates.
• Rapidly rising inflation expectations may already worry the more hawkish Governing Council members.
• Short end pricing may correct somewhat lower on Thursday, but in the bigger picture global inflation worries still have room to escalate.

Overall, this is a slightly dovish forecast that would be expected to weigh on the euro and support the US dollar as investors anticipate that the Fed is ready and willing to announce tapering at the upcoming FOMC meeting on Nov 3. 

Powell himself said Friday that “The risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation.” He added that “I would say our policy is well-positioned to manage a range of plausible outcomes. I do think it’s time to taper and I don’t think it’s time to raise rates.”

Gold technical analysis

From a daily perspective, the price is attempting a move higher, as Friday's price action shows, and the wick's high of the daily candle was a likely target for the sessions ahead, as illustrated in the following pre-market open analysis: Chart of the Week: Gold bears lurk at weekly trend line resistance

''$1,835 guards territory to $1,880 as follows:

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Gold bulls making progress