Gold Price Forecast: $1800 testing bullish commitments, Fed minutes hold the key

Gold price finds support from DXY pullback amid risk recovery.
Coronavirus fears underpin gold price amid softening US inflation.
Gold price awaits the Fed minutes for a fresh direction.

Dhwani Mehta FXStreet

Gold price witnessed good two-way price movements on Tuesday but remained within a $15 range. The yellow metal finished the day marginally lower at $1786, having faced rejection just below $1800. The rapid spread of the Delta covid variant globally combined with the rising geopolitical tensions in Afghanistan kept the buoyant tone intact around the safe-haven US dollar, driving it to fresh monthly highs above 93.00 against its main rivals. Gold’s upside attempts remained capped by the dollar’s strength. Besides, softening inflation expectations, after a big miss on the US Retail Sales data, also boded ill for gold price.

Meanwhile, broad risk aversion led weaker Treasury yields and Wall Street indices helped cushion the losses in the metal. Further, Fed Chair Jerome Powell’s cautious remarks also lent support to gold price. Powell said, in his appearance on Tuesday, “We're not simply going back to the economy that we had before the pandemic,” adding that it is important that the central bank adapts to those changes.

Heading into the Fed’s July meeting’s minutes release, gold price is witnessing a buying resurgence, as the bulls look to reclaim the $1800 mark. The FOMC minutes will throw fresh light on the US central bank’s tapering plans, especially after Powell’s not-so-encouraging remarks on the economy, given the recent Delta strain spread. Escalating covid concerns continue to remain an upside risk for gold price, as they bring along a lot of uncertainty on the prospects of global economic recovery.

However, the dollar is easing ahead of the key event risk amid a minor recovery in the risk sentiment, which has fuelled the gains in gold price (for now). If the risk aversion seeps back in the sessions ahead, the safe-haven dollar could catch a fresh bid and dent’s gold’s bullish potential. Also, investors will refrain from placing any big bets on the bright metal ahead of the FOMC minutes.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

At the time of writing, gold price is keeping its range between the two key Simple Moving Averages (SMA) on the four-hour chart.

The horizontal 200-SMA at $1796 appears a tough nut to crack for gold bulls while the immediate downside remains capped by the horizontal 100-SMA at $1786.

The Fed minutes could yield a breakout in either direction. However, with the Relative Strength Index (RSI) edging higher above the midline, the risks remain skewed towards an upside breakout.

The 200-Daily Moving Average (DMA) at $1813 could be next on the buyers’ radar.

Therefore, a four-hourly closing above the 200-SMA could call for a test of the $1800 mark.

Alternatively, any dip below the 100-SMA could expose the bullish 21-SMA at $1780, below which the last line of defense appears at the downward-sloping 100-SMA at $1759.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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