Gold Price Forecast: XAU/USD approaches $1,800 as demand for the USD prevails

XAU/USD Current price: $1,831.08

• Global growth remained subdued throughout the third quarter of the year.
• Stronger US government bond yields underpinned the American currency.
• XAU/USD is extremely oversold, but there are no technical signs of downward exhaustion.

Spot Gold fell to a fresh multi-month low of $1,827.11 a troy ounce on Monday amid resurgent  US Dollar demand. The Greenback suffered a minor setback at the beginning of the week, as generally encouraging Chinese data and upbeat United States (US) news underpinned the mood.

On the one hand, the official Chinese Producer Manager Indexes held above 50 in August, the line that separates contraction from economic expansion. Despite the recent turmoil, the Asian giant shows signs of economic resilience. On the other hand, the United States (US) Congress agreed over the weekend an extension of the debt ceiling to dodge a partial government shutdown.

The market sentiment soured as the day went by, as the S&P Global PMIs confirmed most major economies kept struggling with growth in the third quarter of the year. On a positive note, the official US ISM Manufacturing PMI improved in September to 49 from 47.6 in August, beating expectations. The employment sub-index was the strongest, jumping to 51.2, while the Price Paid contracted the most, down to 43.8  from 48.4.

Meanwhile, government bond yields pushed higher, boosting demand for the USD. The yield on the 10-year Treasury note peaked at 4.70%, its highest since 2007, holding nearby at the time of writing. The 2-year note currently offers 5.11%, still far from the 5.20% peak posted after the latest Federal Reserve (Fed) monetary policy announcement.

XAU/USD short-term technical outlook

XAU/USD trades near the aforementioned low, down for a sixth consecutive day, and at levels last seen in March this year. From a technical point of view, the risk skews to the downside, as technical indicators maintain their firmly bearish slopes, with the Relative Strength Index (RSI) indicator in extreme oversold territory but without signs of downward exhaustion. At the same time, the bright metal develops far below all its moving averages, with the 20 SMA accelerating south below the longer ones.

For the near term, the chances also favor a downward extension. XAU/USD keeps posting lower lows below a sharply bearish 20 SMA, which accelerates south below the longer ones. Technical indicators, in the meantime,  have lost their bearish momentum but consolidate within extreme oversold levels with no signs of changing course.

Support levels: 1,824.30 1,809.40 1,797.55

Resistance levels: 1,845.20 1,858.30 1,871.50

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