|

Gold Price Forecast: Acceptance above 100/200-day SMAs favours XAU/USD bulls

  • Gold regained positive traction on Monday and inched back closer to multi-week tops.
  • Rising inflation expectations, fresh COVID-19 jitters benefitted the safe-haven metal.
  • A stronger USD, hawkish central bank outlooks kept a lid on any meaningful upside.

Gold caught some fresh bids on the first day of a new trading week and inched back closer to six-week tops touched on Friday. Expectations for a faster than expected rise in inflation continue acting as a tailwind for the XAU/USD, which is considered as a hedge against inflation. Meanwhile, the latest outbreak of COVID-19 infections in China has raised worries about the imposition of economically damaging lockdowns amid the country's zero-tolerance approach to the disease. Apart from this, concerns about a credit crunch in China's real estate sector overshadowed the dominant risk-on mood and extended additional support to the safe-haven precious metal.

Bulls further took cues from the overnight modest pullback in the US Treasury bond yields, which tends to benefit the non-yielding yellow metal. That said, a combination of factors contributed to keep a lid on any further gains for the commodity, rather prompted some selling during the Asian session on Tuesday. The US dollar staged a solid bounce from one-month lows and held traders from placing aggressive bullish bets around the dollar-denominated commodity. This, along with growing market acceptance about the prospects for an early policy tightening by major central banks, further contributed to cap the upside for gold prices.

The Fed Chair Jerome Powell reaffirmed on Friday that the US central bank will soon begin tapering its bond purchases. Investors also seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Adding to this, reports indicated that the Bank of Japan is discussing phasing out the COVID-19 loan program if infections in the country continue to dwindle. Moreover, the Bank of England officials have signalled about an imminent interest rate hike later this year. Hence, the key focus will be on the key central bank meetings in Canada, Japan and the Eurozone, which should infuse some volatility during the second half of the week.

In the meantime, traders will take cues from Tuesday's US economic docket, featuring the releases of the Conference Board's Consumer Confidence Index, Richmond Manufacturing Index and New Home Sales. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Apart from this, the broader market risk sentiment should allow traders to grab some short-term opportunities around the XAU/USD.

Technical outlook

From a technical perspective, acceptance above the 100/200-day SMAs confluence hurdle and a subsequent strength beyond the $1,800 mark favours bullish traders. However, repeated failures near the $1,812-14 intermediate hurdle warrant some caution before positioning for any further gains. Nevertheless, the bias remains tilted in favour of bullish traders and supports prospects for a move towards challenging the $1,832-34 heavy supply zone.

On the flip side, any meaningful pullback towards the technically significant moving averages confluence resistance breakpoint, around the $1,795-90 region, should be seen as a buying opportunity. This, in turn, should help limit the downside near the $1,782-81 horizontal support. Some follow-through selling will negate the positive outlook and drag gold prices back towards the $1,760 support zone. The downward trajectory could further get extended towards retesting monthly swing lows support, around the $1,750-45 region.

fxsoriginal

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

More from Haresh Menghani
Share:

Editor's Picks

AUD/USD sticks to neutral bias above 0.7100 amid cautious markets

AUD/USD holds steady above 0.7100 in the Asian session on Monday as the US Dollar stalls its modest pullback from the highest level since late July amid persistent geopolitical uncertainties. The PBOC status quo on Loan Prime Rates also weighs on the Aussie. However, bets on another RBA rate hike continue to underpin the Australian Dollar ahead of the Trump-Xi Summit.

USD/JPY eases below 157.00 amid looming intervention risks

USD/JPY is easing back below 157.00 in Asia on Monday, undermined by modest Japanese Yen strength amid looming intervention risks after Friday's BoJ rate check. A Japanese holiday also keeps traders on edge amid escalating geopolitical tensions between Russia and Ukraine and in the Middle East. As a result, the US Dollar pauses its pullback, limiting the pair's downside.

Gold remains depressed around $4,350 amid rate jitters, modest USD strength

Gold maintains its offered tone through the first half of the European session, and currently trades around $4,350, down over 0.50% for the day. The commodity, however, holds comfortably above a six-week low, touched last Wednesday as traders await further developments around the Middle East crisis and their implications for inflation. This, in turn, would influence interest rate expectations and, in turn, drive the non-yielding bullion.

Bitcoin hits $85,000 for the first time in eight months
Bitcoin price reclaims $85,000 on Monday, advancing last week’s 5% recovery toward an eight-month high. The recovery in King Crypto aligns with renewed institutional demand, with Exchange Traded Funds (ETFs) recording $433 million in inflows on Friday.
The week ahead: Fuel prices in focus as we lead up to key eco releases

Financial markets are in a strange position as we move to the final weeks of Q3, uncertainty and volatility continue to grip markets, but the oil price is falling; and European and US stocks are poised to open higher later on Monday. Market stresses are concentrated in sovereign bonds, and European and US yields had another scare late on Friday, and moved higher.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.