Gold Price Forecast: XAU/USD bulls eager to end consolidation phase, critical drop in yields eyed


  • Gold has taken advantage of lower US yields to resume its upside move.
  • A drop of all-important 10-year yields below 1.60% could trigger an upside move.
  • The daily chart is showing that XAU/USD has exited overbought conditions.

Is the correction over? That is the crucial question for gold bulls after the recent bounce. Buyers can be thankful for a drop in US Housing Starts – which came out at 1.52 million annualized vs. 1.58 million expected in October.

Tuesday's report of a surge in US retail sales – joining excellent jobs figures and steaming hot inflation – sent the dollar higher and XAU/USD down. That triggered a much-needed correction. 

Things changed on Wednesday as housing figures somewhat cooled expectations that the Federal Reserve would raise interest rates. Returns on 10-year Treasuries fell from 1.649% to 1.1615% at the time of writing, making the yieldless precious more attractive. Instead of falling under $1,850, gold is eyeing $1,870 once again.

The Fed remains in focus. No fewer than five officials at the world's most powerful central bank are set to speak in the coming hours. If the say that the current path of tapering the bank's bond-buying scheme – gradually printing fewer dollars – is on track, gold could advance. However, if they are alarmed by the heating economy, they could signal a faster pace of reduction. 

How will they swing? Most members are dovish, and more importantly, they like sticking to the plan. Even if they remain silent, it could allow gold to gain more ground.

XAU/USD Technical Analysis

The most significant indicator to watch is the Relative Strength Index (RSI) on the daily chart. After it touched 70 – flirting with overbought conditions – gold took a breather and fell abruptly from the highs. At the time of writing, it is below that 70 level, thus allowing space for more gains. Momentum is positive and the 100-day SMA is about to cross the 200-day SMA to the upside, another bullish sign.

Resistance awaits at the new peak of $1,878, followed by $1,901 and $1,913, levels that capped the precious metal back in May. 

Support is at $1,858, followed by $1,850 and the broken triple-top of $1,834.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD lost its traction and declined below 1.0850 in the American session on Thursday. Upbeat PMI data from the US, combined with the mixed action seen in Wall Street's main indexes, helps the US Dollar gather strength and weighs on the pair.

EUR/USD News

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD came under modest bearish pressure and declined toward 1.2700 in the second half of the day on Thursday. The US Dollar (USD) benefits from the PMI data, which showed an ongoing expansion in the private sector at an accelerating pace, and weighs on the pair.

GBP/USD News

Gold extends slide below $2,350.00

Gold extends slide below $2,350.00

Gold stays on the back foot and trades at its lowest level in over a week below $2,350. The benchmark 10-year US Treasury bond yield rises more than 1% following the stronger-than-forecast PMI data from the US, forcing XAU/USD to stretch lower.

Gold News

As Ethereum spot ETF approval nears, these altcoins could explode

As Ethereum spot ETF approval nears, these altcoins could explode

It is not surprising that altcoins related to Bitcoin saw a major rally post-Bitcoin spot ETF approval. Likewise, tokens closely related to Ether could ride the ETF approval wave. Ethereum Classic, Pepe, Floki and other DeFi tokens could gain momentum as the ETH ETF approval deadline nears. 

Read more

US S&P Global PMIs Preview: Economic expansion set to persist in May

US S&P Global PMIs Preview: Economic expansion set to persist in May

On Thursday, S&P Global will issue its flash estimates of the United States (US) Purchasing Managers Indexes (PMIs), a monthly survey of business activity. The survey is separated into services and manufacturing output and aggregated into a single statistic, the Composite PMI.

Read more

Majors

Cryptocurrencies

Signatures