Gold Price Forecast: Will the XAU/USD recovery extend ahead of Jackson Hole?

Gold price is posting sizeable gains so far this Thursday, extending its recovery into the third straight day. The renewed downside in the US dollar is helping the bright metal gain bullish momentum. However, the further upside appears elusive, as the US Treasury yields hold the higher ground. The benchmark 10-year US Treasury yields sit at the highest levels in two months near 3.12%, as odds of a 75 bps September Fed rate hike are now raised to about 60% vs. 55% seen on Wednesday.

Despite hawkish Fed expectations, the dollar remains on the back foot, as China’s additional economic stimulus (worth CNY1 trillion) keeps the market mood buoyed. Further, investors resort to repositioning in the lead-up to the Jackson Hole showdown and the second estimate of the US Q2 GDP release. Friday’s speech by Fed Chair Jerome Powell will hold the key, as markets will closely examine his words for clues on future rate hikes and the health of the economy.

Also read: Jackson Hole Symposium Preview: Will Powell power dollar bulls?

XAU/USD witnessed good two-way business on Wednesday but preserved its previous recovery gains and settled the day above the critical $1,750 psychological barrier, even though the yields hit multi-week highs. The greenback reversed early gains amid a better performance on Wall Street and mixed US Durable Goods and Pending Home Sales data. Recession fears continued to loom keeping the downside checked in the safe-haven dollar at gold’s expense.

Gold price technical outlook: Daily chart

Gold price is closing in on $1,760, the 38.2% Fibonacci Retracement (Fibo) level of the recovery from yearly lows of $1,681 to the August 10 high of $1,808, amid a three-day recovery from monthly lows of $1,728.

If bulls manage to find a strong foothold above the latter, then a test of the 21 and 50-Daily Moving Averages (DMA) at $1,769 will be inevitable. Further up, the 23.6% Fibo resistance of the same ascent at $1,778 will challenge the bearish commitments.

Bulls, however, remain cautious, as the 14-day Relative Strength Index (RSI) still remains beneath the midline. Investors also remain wary of the 21 and 50 DMAs crossover, as indecision prevails ahead of the Jackson Hole Symposium.

On the flip side, the immediate support is pegged at the daily low of $1,750, below which the 50% Fibo level at $1,744 will be retested. The next critical downside cap is aligned at $1,729, which is the golden ratio – 61.8% Fibo level.