Gold Price Forecast: Corrective decline likely to resume amid risk-off mood, bear pennant

Gold price stalled its recent run-up to monthly highs and fell sharply on Friday, losing nearly $17 after failing to hold up at higher levels. The precious metal settled the week at $1809 after having faced rejection once again near $1834. In doing so, gold price delivered a weekly closing below the critical 200-Daily Moving Average (DMA) at $1825, reinforcing the bearish interests. Fundamentally, the extension of the rebound in the US dollar across the board weighed heavily on gold price, especially after mixed US Retail Sales and Consumer Sentiment data refueled concerns over the pace of the US economic recovery. Further, uncertainty on the Federal Reserve’s (Fed) next monetary policy move also acted as a headwind for gold price. Additionally, gold in India was sold at a discount last week for the first time in nearly a month amid higher prices, which eventually collaborated with the correction in its price.

Starting out a fresh week on Monday, gold price attempting a tepid bounce above $1810, finding some support from broad risk aversion. Escalating tensions over the Delta covid strain on both sides of the Atlantic and Asia-pac region continue to keep the investors on the edge lifting the safe-haven appeal of gold and the dollar. If the risk-off mood worsens in the day ahead, the greenback is likely to gain further ground across its major rivals, limiting gold’s upside attempts. However, the downbeat mood-led Treasury yields sell-off could likely cushion the downside in gold price. In absence of relevant first-tier macro news from the US, the risk sentiment will continue to lead the way.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold’s four-hour chart shows that the price is consolidating in a tight range around $1815, as the bears take a breather before the next push lower.

Gold price is defending the 50-Simple Moving Average (SMA) at $1812 for now but remains at a risk of additional downside, given that the Relative Strength Index (RSI) holds below the midline.

The recent price action has taken the shape of a bear pennant on the said time frame, signalling caution for the optimists.

A sustained break below the 50-SMA, which also coincides with the bear pennant support, will open floors towards the $1800 level.

Further south, the bullish 100-SMA at $1797 could be put at risk.

To the upside, a four-hourly candlestick closing above the falling trendline resistance at $1817 will invalidate the bearish continuation pattern.

The downward-pointing 200-SMA at $1819 could challenge the recovery momentum

The $1825 round figure will then offer additional resistance to gold buyers.