Gold Price Forecast: Why XAU/USD appears vulnerable heading into the Fed showdown?


  • Gold price licks its wounds in monthly lows amid firmer US dollar.
  • USD benefits from Fed’s tapering bets, China’s Evergrande story-led risk aversion.
  • Gold’s four-hour chart points to deeper loss amid a potential bear flag

After Thursday’s $50 slide, gold price looked to stabilize on Friday, although held on to multi-week lows near $1750. Sellers took a breather after the previous decline, which was mainly seen as a chart-based sell-off after gold price failed to resist above the $1800 barrier. The slide also ensued after the US Retail Sales surprised to the upside in August, showing signs of strengthening economy and reinforced Fed’s tapering bets. On Friday, gold price attempted a bounce but lacked conviction amid a broadly firmer US dollar. The troubled Chinese property developer giant Evergrande’s potential default story dented the investors’ sentiment and lifted the dollar’s safe-haven appeal while rising Treasury yields on tapering bets also aided the greenback, limiting gold’s upside attempts.  

Heading into a big week, with the Bank of England and the Fed central bank meetings in focus, gold price resumes last week’s downtrend and refreshes monthly lows near $1740 amid Fed’s tapering speculations and as risks surrounding Evergrande build up. The US dollar index holds at monthly tops, as the Fed is likely to announce its tapering plans, starting by the end of this year, at its September 21-22 monetary policy meeting. The BOE may also hint at tapering, given the rising inflation in the UK. A potential withdrawal in the monetary policy stimulus will continue to bode ill for gold price. Later in the day, the dynamics in the US dollar and the broader market sentiment will continue to have a significant bearing on gold trades, as the economic calendar appears scarce. Canada’s Federal election is scheduled later on Monday but its outcome is likely to have little to no impact on gold price.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

As observed on the four-hour chart, gold price has confirmed a bear pennant pattern, considering the recent consolidation that followed the previous week’s slide.

Gold price closed the four-hourly candlestick below the rising trendline support at $1752, charting out the bearish continuation formation.

The death cross validated on the same time frame on Friday, adds credence to the potential downside.

The Relative Strength Index (RSI) is holding in the oversold territory, suggesting a bounce could be in the offing. However, given the bearish technical setup, any recovery attempt could be seen as a good selling opportunity.

A failure to defend the monthly lows of $1742, a fresh leg down could initiate towards the $1700 psychological magnate.

Alternatively, the pattern support now resistance at $1753 could challenge gold’s road to recovery.

Further up, the pattern resistance at $1759 could be the next relevant upside target. A sustained move above the latter could expose the bearish 21-Simple Moving Average (SMA) at $1771.

All in all, the path of least resistance for the gold price appears to the downside.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD clings to recovery gains above 1.1350 after EU inflation data

EUR/USD gained traction and climbed to its highest level in more than 10 days above 1.1360 amid the broad-based selling pressure surrounding the greenback. The data from the euro area showed that the annual CPI jumped to 4.9% in November from 4.1% in October, helping the shared currency preserve its strength.

EUR/USD News

GBP/USD advances to mid-1.3300s on renewed dollar weakness

GBP/USD gathered bullish momentum during the European trading hours and climbed to 1.3350 area as the greenback remains under selling pressure amid slumping US Treasury bond yields. Investors await FOMC Chairman Powell's testimony.

GBP/USD News

Gold eyes $1,800 and $1,806 on road to recovery

The precious metal has staged a decent comeback, as bulls look to recapture the $1,800 mark amid a revival of the Omicron covid variant fears. A flight to safety theme remains in vogue killing the demand for the yields.

Gold News

XRP price on edge of cliff as Ripple faces imminent collapse

XRP price followed the rest of the cryptocurrency market lower over the weekend. The US Thanksgiving holiday gave cryptocurrency traders and investors some early Black Friday deals, but downside risks remain.

Read more

Cyber Monday 2021 Discounts!

Glued to your trading screen on Cyber Monday? Upgrade your skills by signing up for FXStreet’s Premium service, offered at a discount of up to 50%. Fellow traders have already taken advantage of Black Friday profits. What about you? 

Subscribe now!

Majors

Cryptocurrencies

Signatures