Gold Price Forecast: XAU/USD corrected sharply lower, long term bullish trend intact

Valeria Bednarik FXStreet

XAU/USD Current price: $4,110.22

A better market mood heavily weighed on the safe-haven metal on Tuesday.
The US will release Consumer Price Index data next Friday.
XAU/USD could extend its corrective decline towards the $4,000 threshold.

Spot Gold plunged on Tuesday amid a better market mood and resurgent US Dollar (USD) demand. The XAU/USD pair fell towards $4,080 before bouncing to the current $4,110 level, holding on to substantial losses in the American afternoon.

The market sentiment improved after the United States (US) President Donald Trump made some optimistic comments about a potential trade deal with China, ahead of an economic conference in South Korea next week, when he will likely meet his Chinese counterpart, Xi Jinping. Global equities reflect the latest optimism, with most global indexes trading in the green.

On a negative note, the US government shutdown continues. The US Senate voted again on Monday on potential funding bills, rejecting both the Democratic and the Republican proposals, though market participants seem unconcerned.

The notorious absence of US macroeconomic data will be broken on Friday, when the Bureau of Labor Statistics will release September Consumer Price Index (CPI) data. The reading is critical ahead of the Federal Reserve (Fed) monetary policy meeting next week.

XAU/USD short-term technical outlook

The daily chart for the XAU/USD pair shows that the sharp decline could be seen as a corrective move. Technical indicators head south almost vertically, but remain within positive levels and erased extreme overbought conditions. At the same time, the pair keeps developing far above all bullish moving averages, with the 20 Simple Moving Average (SMA) currently at $4,001.20.

The near-term technical picture suggests XAU/USD may not be done correcting lower. The pair is currently developing far below its 20 SMA, which turned lower. The 100 and 200 SMAs maintain their bullish slopes below the current level, with the shorter one currently at $4,043. Finally, technical indicators approach oversold readings without signs of giving up and retaining their strong downward momentum.

Support levels: 4,105.10 4,081.70 4,065.90

Resistance levels: 4,134.45 4,148.30 4,162.60

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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