Gold Price Forecast: Dollar’s rebound checks the XAU/USD rise, bullish bias still intact

Gold (XAU/USD) rallied about 1% on Wednesday and clocked fresh one-week highs at $1932 before retracing slightly to finish the day around $1925. The surge in the yellow demand was fueled by the absence of haven demand for the US dollar. Investors cheered the progress on a likely US fiscal stimulus deal ahead of the election, as President Donald Trump leaned towards a larger aid bill while the White House and Democrats moved closer to an agreement.

However, the tide turned in favor of the dollar bulls towards the mid-American session after Wall Street stocks tumbled on reports that Senate Republicans showed reluctance on approving a multi-trillion-dollar stimulus deal. Gold slipped along with stocks, as the correction continues so far this Thursday. Uncertainty over the next round of stimulus talks creeps in, as President Trump lashed out at the House Speaker Nancy Pelosi after she pushed for a $2 trillion proposal.  

Adding to the risk-off mood, US National Intelligence Director and FBI Director warned over Russia and Iran trying to meddle with the November 3 elections. The greenback extends its overnight recovery, keeping gold under pressure. However, any positive development on the stimulus front and or upbeat US jobless claims data could revive the appetite for risk assets, which could likely weigh on the dollar and render gold-supportive.

Gold: Short-tern technical outlook

Daily chart

After a big falling wedge breakout validated on the daily chart on Wednesday, the bulls face a stiff resistance at the 50-daily moving average (DMA) at $1924, at the time of writing.

Therefore, the bullish momentum is likely to regain traction only on a sustained break above the above-mentioned powerful barrier. The next critical resistance is aligned at the October 12 high of $1933.30, beyond which the psychological $1950 level will be put at risk.

The 14-day Relative Strength Index (RSI) has turned lower but holds above the midline at 51.21, suggesting that there is room for further upside.

On the flip side, the 21-DMA at $1898 will continue to guard the downside. A break below the latter could test the 100-DMA support at $1879.