Gold Price Forecast: Risks remain skewed to the downside amid ebbing Omicron fears

Gold suffers from the Omicron optimism, as risk extends into Asia.
Dollar retreats despite firmer yields, all eyes turn to the US inflation data.
Gold price remains vulnerable while below this critical resistance level.

Dhwani Mehta FXStreet

Gold price initially built on Friday’s rebound and clocked fresh three-day highs at $1,788 on Monday. Gold sellers, however, quickly emerged and fought back, knocking down rates below the $1,780 support area. Gold price settled Monday at $1,779, down 0.22% on the day. The downside resumed in gold price as the risk-on mood picked up pace and drove the Treasury yields higher. The yields-driven strength in the US dollar, especially in the face of expectations of the Fed’s faster-tapering, pressured gold price. Investors’ optimism on the effects of the omicron variant may be mild lifted the overall market sentiment on Monday.

The extension of the risk-on trades into Asia this Tuesday also exerted on gold price, as bears flex their muscles towards the $1,760 levels. The losses appear limited (for now), as the US dollar eases across the board, despite the strength in the yields. The risk-on flows remain in vogue, as China continues to pledge support measures to stimulate economic growth while global scientists and experts downplay risks from the new covid variant. The Reserve Bank of Australia’s (RBA) patient policy stance also added to the market’s optimism.

Calendar-wise, there seems nothing market-moving on Tuesday and, therefore, gold price will continue to remain at the mercy of the risk trends and sentiment around the yields and the dollar.

Gold Price Chart - Technical outlook

Gold: Daily chart

Technically, nothing seems to have changed for gold price, as the trading remains confined within a familiar range.

The bears defied the Golden Cross confirmation, as the powerful resistance (confluence of the 50, 100 and 200-DMAs) around $1,792 continues to cap the upside attempts.

The 14-day Relative Strength Index (RSI) is trading flatlined below the 50.00 level, suggesting that the bearish grip remains intact on the bright metal.

A daily closing above the key confluence will expose the $1,800 barrier. The further recovery could call for a retest of Wednesday’s high at $1,809, above which the previous month’s high at $1,814 will put to test.

On the downside, Friday’s low at $1,766 could come to the rescue of gold bulls., below which the crucial support is seen at the horizontal trendline at $1,760. Further south, the $1,750 psychological level will challenge the bullish commitments.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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