Gold Price Forecast: Will XAU/USD find acceptance above this key level? Evergrande, Fed in focus

• Gold price continues to benefit from flight to safety amid Evergrande risks.
• Fed is widely expected to hint at tapering but could disappoint markets.
• Gold price needs to recapture critical 50-SMA on the 4H chart for further upside.

Amidst growing fears of a likely default by indebted Chinese property development giant Evergrande, the risk-off theme extended across the financial markets on Tuesday after a bout of risk reset earlier on. Gold price initially came under pressure, stalling its rebound from six-week lows but the bulls regained poise and drove the rates briefly above $1780. The US dollar’s sharp pullback benefited gold price despite the upbeat American housing starts data, which backed the Fed’s tapering calls. Incoming headlines about the US debt ceiling extension and rising Treasury yields dragged gold price lower towards the close. However, pre-Fed jitters and Evergrande risks kept the buoyant tone intact around gold price.

This Fed day, gold price is holding onto the recent recovery gains, with the upside capped by higher Treasury yields and US dollar. Gold price once again tested the $1780 level after the greenback saw a quick dip on news that Evergrande main Unit Hengda Real Estate Group will make coupon payment for onshore bond due September 23. The Evergrande news briefly lifted the risk sentiment and weighed on the dollar, in turn, boosting gold price. Although the uptick in gold was short-lived, as the US currency regained ground, as investors reassessed the risks, considering that Evergrande’s repayment to its foreign bondholders still looms on Thursday and that nothing was announced regarding the same.

Looking ahead, the Fed decision and Evergrande updates will remain the main market drivers, impacting the dollar and gold trades. Despite wide expectations, Fed may refrain to offer any cues on the tapering timing, in light of the Delta variant spread and impending Evergrande crisis. In absence of a taper signal from the Fed, gold price could extend its recovery momentum towards the $1800 mark. If the Fed delivers a hawkish surprise, the dollar could see a spike, downing gold back to multi-week lows.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold price is challenging key 50-Simple Moving Average (SMA) resistance at $1778 on its recovery journey.

A four-hourly candlestick closing above the latter is critical to extending the recovery towards the $1800 mark.

Ahead of that psychological barrier, the horizontal 200-SMA at $1787 could test the bearish commitments. Next, the downward-sloping 100-SMA at $1793 could also threaten the bullish attempts.

The Relative Strength Index (RSI) has turned flat but holds comfortably above the midline, keeping the upside potential intact.  

On the flip side, strong support is seen at the bullish 21-SMA at $1763, which if broken could trigger a fresh sell-off towards the six-week troughs of $1742. The $1750 psychological level could offer brief relief to gold bulls.