Gold Price Forecast: XAU/USD could test key $1,880 resistance if the recovery holds

Gold price is holding fort above the $1,860 level after hitting a fresh one-week high at $1,865 in Tuesday’s Asian trading. Gold price is cheering a dual joy amidst renewed dovish US Federal Reserve (Fed) interest rate expectations and the ongoing Middle East conflict.

Gold price shines, will it outshine?

Contrary to the United States Dollar (USD), Gold price witnessed a one-way winning streak on Monday, primarily benefiting from its traditional status as a safe-haven asset, geopolitical tensions were on the rise. Following the weekend’s military attacks by the Palestinian militant group, Hamas, from Gaza on Israel and the subsequent retaliatory air strikes from Israel, investors scurried to safety assets such as the US Dollar, Gold price, US bonds and the Japanese Yen, as risk-aversion remained in full swing in the first half of Monday’s trading.

In American trading, markets witnessed a major turnaround in risk sentiment, as several Fed policymakers took up the rostrum and suggested that the recent upsurge in US Treasury bond yields has stoked up borrowing costs, which could dissuade the Fed from considering one more rate hike by year-end.

Dallas Fed President Lorie Logan said on Monday, "if long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the fed funds rate.” Fed Vice Chair Philip N. Jefferson stated that “looking ahead, I will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future path of policy.”

The conciliatory Fed commentary boosted risk assets while the US Dollar dropped with the US Treasury bond yields, allowing Gold price to build on the previous recovery from seven-month lows.

As for Tuesday’s trading, Asian markets take the positive lead from Wall Street overnight, keeping the US Dollar contained to the downside. Although further upside in Gold price depends on fresh developments on the Israel crisis and the upcoming Fedspeak. Fed officials Raphael Bostic, Christopher Waller, Mary Daly and Neal Kashkari are scheduled to speak later in the day.

Markets are currently pricing only a 14% chance of a rate rise at the Fed's next policy meeting in November, down from about 30% a day ago, according to the CME Group’s FedWatch tool.

Gold price technical analysis: Four-hour chart

As observed on the four-hour chart, Gold price has stalled its recovery momentum, as the Relative Strength Index (RSI) indicator remains in the overbought region, warranting caution for buyers.

However, the 21-Simple Moving Average (SMA) is looking to cross the 50 DMA from below, suggesting that a Bull Cross remains in the offing.

Therefore, a minor pullback in Gold price could be seen toward the abovementioned confluence zone at around $1,838, which could provide a fresh buying opportunity for the optimists.

Acceptance above the $1,865 level could trigger a fresh upswing toward the key resistance at $1,880, which is the intersection of the beairsh 100 SMA, September 28 and 29 highs.

Failure to defend the $1,838 confluence support will likely reopen floors toward thw multi-month low of $1,811. Ahead of that, the $1,820 round level will lend support to Gold buyers.