Gold Price Forecast: US Retail Sales to confirm XAU/USD’s bullish reversal?

Risk-off mood-led DXY’s strength caps gold price at 21-DMA.
Flight to safety downs the yields while limiting gold’s pullback.
US Retail Sales hold the key for the next direction in gold price.

Dhwani Mehta FXStreet

Gold price extended its previous week’s bullish momentum into Monday, rallying further to reach the highest levels since August 6 at $1789 amid a narrative of an intense flight to safety narrative. Investors s scoured for safe-havens such as US Treasuries, gold and the US dollar, especially after the Chinese activity data disappointed markets and reinforced the China slowdown concerns, heightening the risk-off trading. The rapid spread of the Delta covid variant globally and the Taliban recapturing power in Afghanistan over the weekend spooked markets. However, gold price eased slightly at the close amid the parallel dollar’s strength and new record highs on Wall Street.

On Tuesday’s trading so far, gold price is reversing the previous gains amid persistent upbeat tone seen around the US dollar, as investors turn cautious ahead of the critical US Retail Sales data due for release at 1230 GMT. The country’s consumer spending is likely to drop by 0.2% in July vs. 0.6% booked in June while the core figures are seen easing to 0.1% in the reported month. A bigger-than-expected fall in the American retail spending could add to the dour market mood, bolstering the greenback’s safe-haven appeal at gold’s expense. However, downbeat data could ease Fed’s tapering expectations, which could help limit gold’s pullback from weekly tops. Looming covid concerns will also lend support to gold buyers, as they await the FOMC minutes for further trading impetus.

Gold Price Chart - Technical outlook

Gold: Daily chart

As observed on the daily chart, gold price is facing stiff resistance at the 21-Daily Moving Average (DMA) at $1790, which aligns near the previous day’s high.

A sustained break above the latter is needed to confirm the bullish reversal from five-month lows of $1688.

If the bulls recapture the latter convincingly, then a test of the 50-DMA at $1800 could be inevitable.

Further up, the mildly bullish 100-DMA at $1806 could impede the advance towards the 200-DMA at $1813.

The 14-day Relative Strength Index (RSI) lies flattish just below the midline, keeping gold sellers still hopeful.

Should the pullback pick up pace a drop towards Monday’s low of 1771 could be in the offing. The next relevant support is seen at the $1750 psychological level.

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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