Gold Price Forecast: Will XAU/USD recapture $1,825 heading into 2023?

Gold price is building on the previous gains, keeping its sight on the multi-month top at $1,825 amid light trading on Tuesday. The United States Dollar (USD) extends its weakness, as risk flows dominate amid China’s continued shift from its zero-Covid policy.

United States Dollar weakens alongside US Treasury bond yields

Thin trading conditions persist after the long Christmas holiday weekend, allowing the Gold bulls to flex their muscles amid a broad-based United States Dollar alongside the US Treasury bond yields. The renewed US Dollar weakness could be associated with a risk-on market profile, as investors cheer on China’s further relaxation of Covid restrictions. China’s National Health Commission (NHC) said in a statement on Tuesday, China will stop requiring inbound travelers to go into quarantine starting from January 8. This is seen as a major step by China towards easing curbs on its borders, which have been largely shut since 2020. China’s further shift from its zero-Covid policy is expected to stimulate the economic recovery by way of boosting domestic demand. It’s worth noting that China is the world’s top Gold consumer.

At the time of writing, the United States S&P 500 futures are up over 0.50% on the day while the US Dollar Index is dropping 0.20% while the benchmark 10-year US Treasury bond yields shed 0.53% so far. The subdued performance in the US Treasury bond yields is also underpinning the sentiment around the non-yielding Gold price.

Risk sentiment to lead the way for Gold price

With markets still in the post-Christmas holiday mood, while gearing up for the extended New Year weekend ahead, risk trends will emerge as the main driver for the Gold price going forward. The economic calendar from the United States is devoid of any high-impact data releases, leaving USD-priced Gold at the mercy of the market mood-induced US Dollar trades. Although the United States Goods Trade Balance and Housing data could briefly entertain traders later this Tuesday.

Bracing for the year 2023, Gold traders are anticipating a policy shift from the US Federal Reserve (Fed), even though Federal Reserve Chair Jerome Powell signaled at the December meeting that the United States central bank will deliver more rate hikes next year.

Gold price technical analysis: Daily chart

From a short-term technical perspective, Gold price is moving upward in an ascending triangle formation, with bulls targeting the horizontal trendline resistance at $1,825.

The path of least resistance for Gold price appears to the upside amid a bunch of healthy support levels. The immediate support awaits at $1,791, which is the confluence of the rising trendline and the bullish 21-Daily Moving Average (DMA).

Daily closing below the latter will confirm the downside break from the triangle, negating the ongoing bullish momentum.

The next downside cap is seen at the mildly bearish 200DMA at $1,782. Further south, the dashed horizontal support at $1,773 will be probed.

However, with the bullish 14-day Relative Strength Index (RSI) and a bull cross confirmation in play, the upside appears more compelling.

Gold price needs acceptance above the December 14 high of $1,814, for another run toward the critical resistance at $1,825.