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.