Gold Price Forecast: 50-DMA to test bulls’ commitments again, as focus shifts to US data, central banks

Having failed to sustain at higher levels, gold price tumbled nearly 1% on Wednesday, reversing this week’s advance. Resurgent US dollar demand across the board, despite the upbeat market mood and falling Treasury yields, dented gold’s appeal. The dollar cheered the optimism over the US stimulus progress while an unexpected rebound in the American Consumer Confidence and stronger Home Sales data added the greenback’s strength. Encouraging US data hinted at strengthening economic recovery, despite the rising inflation pressures, cementing the Fed’s tapering next month. However, strong US corporate earnings reports drove the Wall Street indices to record highs, further fuelling the risk-on market mood, which capped the advance in the safe-haven dollar and put a floor under gold price.

 Heading towards the key central banks’ monetary policy decisions and critical US economic data, gold is losing further ground this Wednesday, as the US dollar clings onto the recent gains amid a rebound in the Treasury yields across the curve. The relentless rise in global inflation is fuelling expectations for sooner-than-expected monetary policy expectations, lifting the sentiment around the yields. Gold price shrugs off the risk-off sentiment, as investors gear up for the US Durable Goods Orders release, with the headline number likely to drop to 1.1% in September vs. 1.8% previous. The US macro news will significantly affect the dollar trades, in turn, gold’s price action. Gold traders will watch out for any hawkish hints from the Bank of Canada (BOC) policy meeting while the main event risk this week remains the US Q3 GDP report and the European Central Bank (ECB) decision.

Gold Price Chart - Technical outlook

Gold: Daily chart

As observed on the daily chart, gold price has opened Wednesday just below the critical 200-Daily Moving Average (DMA) at $1793.

At the time of writing, the bright metal is challenging the mildly bearish 100-DMA support at $1789, eyeing a retest of the horizontal 50-DMA cap at $1780.

Further south, the upward-pointing 21-DMA at $1771 could come to the rescue of gold bulls.

However, with the 14-day Relative Strength Index (RSI) still holding above the midline, the bullish bias appears intact.

If the buyers manage to defend the 50-DMA once again, then a rebound towards the 200-DMA will be on the cards.

A daily closing above the 200-DMA is critical to revive the previous week’s uptrend. The six-week highs of $1814 will be once again in the buyers’ sights should $1800 hold the fort on the upside.  

The falling trendline resistance at $1811 could also offer strong resistance on the road to recovery.