Gold Price Forecast: XAU/USD bulls await ascending triangle breakout

• Gold benefitted from the spillover effect of a short-squeeze in silver.
• A strong rebound in the US equity futures capped gains for the metal.
• Investors now eye the US ISM Manufacturing PMI for some impetus.

Gold opened with a bullish gap on the first day of a new trading week, albeit lacked any strong follow-through and remained below three-week tops touched on Friday. The precious metal benefitted from the spillover effect of a short-squeeze in silver – similar to what was seen in GameStop shares during the previous week. However, a combination of factors held bulls from placing aggressive bets and kept a lid on any further gains for the commodity.

A solid rebound in the US equity markets was seen as one of the key factors capping gains for the safe-haven XAU/USD. Apart from this, reports that ten Republican senators urged the US President Joe Biden to cut the $1.9 trillion price tag on his proposed COVID-19 stimulus package further weighed on the non-yielding yellow metal. In fact, Republican pitched plan with a reported $600bn to garner bipartisan support. More details are due to be released later this Monday.

Meanwhile, fading hopes for rapid approval of additional US economic stimulus measures was evident from the ongoing decline in the US Treasury bond yields. This, in turn, undermined the US dollar and might help limit any meaningful slide for the dollar-denominated commodity. Market participants now look forward to the US ISM Manufacturing PMI for some trading impetus. The key focus, however, will remain on the broader market risk sentiment and the US stimulus headlines.

Short-term technical outlook

From a technical perspective, the recent recovery from the vicinity of the $1800 mark has been along upward-sloping trend-line support. This, along with a strong horizontal resistance near the $1875-76 region, constitutes the formation of an ascending triangle on hourly charts. Ascending triangles have a bullish bias and are typically seen as a continuation pattern, though sometimes mark a reversal.

A sustained strength beyond the triangle resistance will suggest that the commodity has bottomed out in the near-term and set the stage for a further near-term appreciating move. Bulls might then aim to reclaim the $1900 mark before pushing the XAU/USD further towards the $1922-24 supply zone.

On the flip side, any meaningful slide might continue to attract some buying near the triangle support, currently near the $1842 region. Failure to defend the mentioned support level will negate the constructive outlook and prompt some technical selling. The precious metal might then accelerate the fall further towards intermediate support near the $1830 region before eventually sliding back to challenge the $1800 round-figure mark.