Gold Price Forecast: Bull flag and dovish Fed pivot open doors toward $1,787

Gold price is rejoicing fresh bids above the $1,750 psychological level in what seems to be another down day for the United States Dollar (USD). Investors are likely to hold the recent upside in Gold price amid holiday-thinned light trading conditions on account of Thanksgiving Day in the United States this Thursday.

United States data, Federal Reserve minutes smash US Dollar

The US Dollar and US Treasury bond yields are reeling from the pain inflicted by the dovish US Federal Reserve (Fed) November meeting minutes and discouraging top-tier United States economic releases. The FOMC minutes read: "A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate" adding that “a slower pace in these circumstances would better allow the Committee to assess progress toward its goals of maximum employment and price stability.”

Meanwhile, the United States S&P Global preliminary Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 46.3 this month from a final reading of 48.2 in October, signaling heightened recession risks in the world’s largest economy. The US weekly Jobless Claims hit three-month highs of 240K, in the face of rising layoffs in the United States technology sector. Markets ignored the 1% jump in the US Durable Goods Orders data amid a slowdown in the American economy. The highly-influential United States events almost sealed in a 50 basis points (bps) rate hike by the Federal Reserve in December, triggering a sharp sell-off in the US Dollar alongside the US Treasury bond yields while powering the upswing in Gold price. Lower rates tend to benefit the non-interest-bearing Gold price.

China covid woes affect physical Gold demand

Amidst a dovish Federal Reserve pivot, Gold price has ignored China’s covid resurgence and fresh restrictions even though these factors have impacted the physical gold demand in Asia this week. Gold premiums in top hub China have eased further while higher domestic prices have curbed the demand for the yellow metal in India. Note that India and China are the world’s top two Gold consumers. China's daily coronavirus cases hit a record high since the beginning of the pandemic, the official data showed Thursday. The country recorded 31,454 domestic cases, with major cities back under lockdown restrictions.

The market sentiment remains cautiously optimistic, as the Federal Reserve’s dovishness overshadows China’s covid concerns, as traders from the United States move on the sidelines to celebrate Thanksgiving Day.

Gold price technical outlook: Daily chart

Gold price finally yielded a bull flag confirmation after closing Thursday above falling trendline resistance, then at $1,737.

The upside break opens doors toward the three-month high of $1,787. Although bulls will need to clear this week’s high near $1,770, at first.

Adding credence to the bullish potential, the upward-sloping 21-Daily Moving Average (DMA) crossed the mildly bearish 100DMA for the upside, validating a bull cross.

The 14-day Relative Strength Index (RSI) is looking north above the midline, justifying the move higher.  

On the flip side, a strong cushion is seen at Monday’s low of $1,733, below which the confluence of the 21 and 100DMAs at $1,712 will be challenged. The last line of defense for Gold price is seen at the November 10 low of $1,703.