Gold Price Forecast: Defending 23.6% Fibo is critical for XAU/USD’s further upside

Gold price is posting moderate losses this Monday, kicking off the week on the wrong footing while snapping a four-day uptrend. The extended recovery in the United States Dollar (USD) weighs on the bright metal amid a risk-off market profile.  

United States Dollar rejoices China-led safe-haven demand

China reported a fifth straight daily record of 40,347 new COVID-19 infections on November 27, which led to protests in cities across China against President Xi Jinping’s covid-Zero policy, threatening the ruling Communist Party to step down. These anti-covid lockdown protests in China triggered a massive risk-aversion wave in Asia at the start of the week and big bearish opening gaps in the riskier assets. Amidst market unrest and panic, the US Dollar’s demand as a safe-haven shot through the roof, weighing on the US Dollar dominated Gold price.

At the time of writing, the US Dollar Index added 0.40% on the day, while the Chinese benchmark index Shanghai Composite lost over 1%. The US S&P 500 futures, a risk barometer, have shed 0.65%. Intensifying risk-off flows also scurried investors for safety into the United States government bonds, sending US Treasury bond yields lower across the curve. Negative US Treasury bond yields help limit the downside in Gold price.

Gold price looks to US Federal Reserve speeches

With developments surrounding China’s covid issues likely significantly impacting risk sentiment and the US Dollar valuations in the day ahead, Gold price is awaiting the speech from the US Federal Reserve policymaker John Williams for fresh cues on the United States central bank’s policy tightening outlook. The US Dollar ended last week in the red after dovish Federal Reserve Minutes heightened expectations of smaller rate increments in the coming months. The US Federal Reserve minutes showed in the previous that a “substantial majority” of Federal Reserve policymakers agreed it would “likely soon be appropriate” to slow the pace of rate hikes.

United States Nonfarm Payrolls and Fed Chair Jerome Powell’s speech eyed

In the meantime, Gold traders hold their nerves, bracing for a fresh batch of high-tier economic events from the United States. Wednesday’s United States ADP Employment Change and the second estimate of the US Gross Domestic Product (GDP) will be closely scrutinized ahead of Federal Reserve Chair Jerome Powell’s speech. Fed Chair Powell is due to speak about the economic outlook, inflation, and the labor market at the Brooking Institution, in Washington, DC. Powell’s words will hold significant relevance before Friday’s all-important US Nonfarm Payrolls release.

Gold price technical outlook: Daily chart

Following a bull flag breakout last week, Gold price is extending its consolidative phase above $1,747 on Monday. That level is the 23.6% Fibonacci Retracement (Fibo) level of the latest rally from the November 3 bottom at $1,617.

The 14-day Relative Strength Index (RSI) remains in the bullish territory, while the 21 and 100-Daily Moving Average (DMA) bullish crossover keeps the upside potential intact.

The next topside resistance is at Friday’s high of $1,761, followed by the $1,770 round figure.

On the flip side, a breach of the abovementioned key Fibo support at $1,747 will open floors for a test of the $1,720. At that level, the ascending 21DMA and 38.2% Fibo level converge.

Further down, the horizontal 50DMA at $1,712 will come to the rescue of Gold buyers.