Gold Price Forecast: XAU/USD bulls cheer dollar weakness, favorable technicals

Gold (XAU/USD) started out the week on the front foot, taking cues from the mild gains booked last week. The yellow metal took on the $1950 barrier on Monday, as the bulls received a boost on the dual fronts. The US dollar retreated across the board after the vaccine optimism lifted the equities. Over the weekend, AstraZeneca and Oxford University announced that they are set to resume coronavirus vaccine clinical trials in the UK after a week’s pause due to safety concerns. Meanwhile, fresh Iran-US geopolitical tensions alongside the omnipresent US-Sino concerns reinforced gold’s safe-haven demand.   Politico reported that Iran is reportedly plotting to kill a US ambassador, in retaliation to the killing of Qassim Soleimani.

In the day ahead, the broader market sentiment and geopolitical developments will continue to influence gold, in absence of relevant US economic releases. However, traders eagerly await the US Federal Reserve (Fed) monetary policy decision due later on Wednesday for fresh direction in gold.

Gold: Short-tern technical outlook

Hourly chart

On the hourly chart, the price charted a descending triangle breakout in the last hour after it closed the hour above the falling trendline (pattern) resistance at $1949.

The next barrier on buyers’ radar is the Friday high of $1955, a break above which will put $1960 at risk. Buying interest could accelerate above the latter, opening doors towards Thursday’s high of $1966 en route the pattern target at $1978. The hourly Relative Strength Index (RSI) has turned flat, still holds above the midline, allowing for more gains.

To the downside, a failure to close Monday above the $1950 barrier could negate the bullish bias. The bulls are needed to defend the critical support at $1940, the confluence of the 100 and 200-hourly Simple Moving Averages (HMA). A break below which the next key support at $1937 will be attacked.