Gold Price Forecast: XAU/USD awaits acceptance above $1,808 for additional upside

The underlying theme that shot gold price through the roof on Thursday, despite the hawkish central banks’ decisions, was the broad-based US dollar sell-off. The post-Fed dollar declines picked up pace after GBP/USD spiked on a surprise rate hike delivered by the Bank of England (BOE). This followed the Fed’s hawkish shift, with the doubled pace of tapering and a likely three rate hikes next year. The European Central Bank (ECB), however, held the key policy settings and announced adjustments to its regular bond buys from early next year. The persistent weakness in the US Treasury yields also offered an additional boost to the non-yield gold. Hawkish central banks’ decisions to combat the growing inflationary risks leave investors worried about their impact on the global economic recovery. Therefore, the sentiment around the global stocks soured, underpinning gold’s bullish momentum.

On the final trading day of the week, gold price is extending its three-day recovery rally, as it sits at two-week highs above the $1,800 threshold. The US dollar is licking its wounds as the yields stabilize so far this Friday. The market mood remains tepid, as the dust settles over the key global central banks’ announcement, with the latest being the Bank of Japan (BOJ) staying put but announcing tapering of its corporate debt buying.

With the key market-moving events out of the way, the year-end flows are likely to emerge as the main driver, as the trading volume gets light. The US economic calendar is sparse and, therefore, the Omicron updates, risk trends and dollar’s price action will be closely followed for fresh trading opportunities in gold price.

Gold Price Chart - Technical outlook

Gold: Daily chart

On the daily sticks, gold confirmed a falling wedge breakout on Thursday after the price gave a daily closing above the descending trendline resistance at $1,787.

The upside break prompted gold price to break through all the major Daily Moving Averages (DMA), as the bulls managed to resist above the 200 and 100-DMAs confluence around $1,795 on a daily closing basis.

The 14-day Relative Strength Index (RSI) is holding ground above the midline, suggesting that there is additional room for the upside in the coming days.

Gold price now needs acceptance above the November 30 highs of $1,808 to extend the bullish reversal from two-month lows.

Bulls will then target the November 26 highs of $1,816 should the buying momentum gain traction.

Alternatively, any retracement from higher levels will seek a retest of the 200-DMA at $1,795, below which strong support around $1,788 will get tested.

That demand area is the confluence of the wedge resistance-turned-support, 21 and 100-DMAs. Further south, Thursday’s low at $1,776 will be put to test once again.