Gold Price Forecast: Corrective pullbacks to be good buying opportunity

Gold (XAU/USD) broke through the $2000 threshold for the first time on record on Tuesday and settled around $2020, staging a massive $50 rally. There were two key catalysts behind the upsurge in the yellow metal, first being the persistent weakness in the US dollar, as the US Treasury yields (real and nominal) sit at record lows. The deadly explosion in Beirut further boosted gold’s haven demand. Falling bond yields remain reflective of the worsening US economic picture amid the continued rise in the coronavirus cases and the ongoing US Congress stalemate over the virus relief package.

Gold scaled a new record high of $2031.20 in early Wednesday, building on the previous rally, taking cues from the risk-off tone in the Asian equities. Markets continue to weigh the risks of a stimulus deadlock. Although, a quick retracement knocked-off the bright metal to near $2010 region after fresh reports on the vaccine prompted a mild recovery in the risk sentiment. Despite the corrective slide in the metal, the prospects remain constructive ahead of the US ADP jobs, ISM Non-Manufacturing PMI and stimulus talks.

Short-term technical outlook

Gold: XAU/USD Hourly chart

The hourly chart throws a near-term view on the precious metal, suggesting that buy the dips trading could be well in play, as long as the price holds above the bullish 21-hourly Simple Moving Average (HMA), now placed at $2002.

The hourly Relative Strength Index (RSI) has once again turned north and flirting with the entrance of the overbought territory, backing the case for dip-buying.  

The record highs could be retested if the buyers regain control en route the critical $2050 psychological level.

A break below the 21-HMA support could call for a drop towards the next support of the upward-sloping 50-HMA at $1985.35.

Gold: Additional levels to consider