Gold Price Forecast: XAU/USD bulls take a breather, await ECB for additional upside?

Gold in a bullish consolidation phase, clings to 21-DMA.
US stimulus hopes, tech rally and ECB optimism down the dollar.
Bullish Doji reversal points to more gains but ECB could be a risk.

Dhwani Mehta FXStreet

Gold (XAU/USD) closed higher for the second straight day on Wednesday, having staged a solid $30 bounce intraday. Gold bounced along with the US stocks amid improved market mood, which diminished the haven demand for the US dollar. The tech rally resumed after the recent correction, driving the Wall Street indices northwards. Further, the Bloomberg report citing that the European Central Bank (ECB) forecasts leak showed more confidence in the outlook boosted the euro at the expense of the greenback. Meanwhile, expectations that the US Congress will reach the much-awaited fiscal stimulus deal lifted the metal, as markets looked past news that AstraZeneca halted its vaccine trials over safety concerns.

All eyes now remain on the ECB monetary policy decision due later on Thursday amid increased dovish expectations, which could benefit the yieldless gold. The central bank is likely to stand pat on its policy, although could leave doors open for stimulus expansion in its December meeting amid negative inflation and concerns over the euro strength. A dovish ECB outcome could bode well for the equities and exacerbate the pain in the dollar, in turn, rendering gold-supportive.

Gold: Daily chart

Gold firmed up on Wednesday, confirming Tuesday’s bullish Doji reversal from 50- day Simple Moving Average (DMA) spotted on the daily chart. Despite the rejection above $1950 mark, the spot managed to close the day above the critical 21-DMA, now at $1948.

The bulls remain hopeful, although acceptance above the falling trendline (symmetrical triangle) resistance at $1958 is needed to extend the bullish reversal. A break above the last could open doors towards Sept 2 high of $1973.34.

Meanwhile, the bullish bias will likely remain intact so long as the price holds above the robust cap around $1916-$1910, where the upward-sloping 50-DMA and rising trendline support coincide.

The 14-day Relative Strength Index (RSI) trades flat but holds above the midline, supporting the case for the further upside.

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Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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