Gold Price Forecast: 21-DMA support holds the key for XAU/USD amid firmer yields

  • Gold holds the lower ground amid firmer Treasury yields.
  • XAU/USD needs a daily close below 21-DMA to extend the downside.
  • A fresh batch of US consumer spending and consumption data awaited.

Gold (XAU/USD) rallied as high as $1790 in the Asian trading on Friday but gave up gains to reached fresh ten-day lows at $1756 after the US Treasury yields hit the highest levels in over two weeks on better-than-expected US Q1 GDP data. The US economy expanded at 6.4% in Q1 on an annualized basis, outpacing expectations of a 6.1% growth. The US weekly Jobless Claims data also came in stronger, reflecting strengthening post-pandemic economic recovery. Risk-appetite improved on the renewed economic optimism that weighed on the safe-haven US dollar, helping stage a modest recovery in gold. However, markets turned cautious, as concerns over rising yields resurfaced, which collaborated with gold’s rebound

This Friday, gold seems to have resumed the downside, as the Treasury yields attempt a bounce across the curve. Meanwhile, the US dollar holds steady, awaiting fresh cues from the Core PCE and personal spending data. Gold traders will continue to closely follow the risk trends, especially in light of the preliminary growth figures from Germany and the Eurozone. If the GDP numbers disappoint, it could reinforce risk-aversion across the board, knocking off higher-yielding assets such as US rates, in turn, putting a floor under gold. US President Joe Biden's additional push for a $1.8 trillion social stimulus package along with the infrastructure spending proposal also keeps the gold buyers hopeful.

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold bears defy the bullish odds for the second straight session on Friday, despite the 14-day Relative Strength Index (RSI) ranging persistently within the positive zone.

The price of gold tested the upward-sloping critical 21-daily moving average (DMA), then at $1756, which is the line in the sand for the optimists.

A daily closing below the latter could extend the bearish momentum towards the 50-DMA at $1745.

The focus will then shift towards the horizontal trendline support at $1728.

Alternatively, the recovery attempts could likely remain capped around $1785-$1790, static resistance.

Further up, the critical 100-DMA barrier at $1799 could be back in play.


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