Gold Price Forecast: XAU/USD down but not out, a test of $1,900 remains on the cards

  • Gold price eases off five-month tops as China shows signs of stabilization.
  • The US dollar licks its wounds amid weak Consumer Sentiment data.
  • Falling yields to support amid an impending bull cross on the daily sticks.

Gold price refreshed five-month highs at $1,869 on Friday, staging an impressive bounce from as low as $1,845, as the US dollar price action remained the exclusive driver. In the first half of the day, gold price extended its corrective pullback, as the greenback revisited 16-month highs across its main pairs amid mounting worries over rising inflationary pressures. Inflation fears stoked investors’ concerns about global economic growth while boosting the Fed’s rate hike expectations, boding well for the dollar at gold’s expense. In American trading, the tide turned against the US currency after the Michigan Preliminary Consumer Sentiment index dropped to ten-year lows amid persistent inflation risks. The swift retracement in the buck helped gold witness a solid comeback.

Starting out a fresh week, gold price renewed multi-month tops but lacked follow-through upside momentum, now trading modestly lower below $1,860. Gold price is ignoring the extended weakness in the US dollar, as a stabilizing Chinese economy offers some comfort to the market, after reeling from the country’s indebted property sector woes. Investors are also weighing up the Fed’s dilemma amid sapping consumer confidence and surging inflation concerns, as they refrain from placing any fresh bids on gold price. A lack of first-tier US macro news could also keep gold’s trading momentum in check. Traders also bide time ahead of Tuesday’s US Retail Sales release, which will provide fresh cues on the Fed’s rate hike timing.

Gold Price Chart - Technical outlook

Gold: Daily chart

Nothing seems to have changed on the short-term technical front, as gold price remains on track for the further upside on a sustained break above the June 16 highs of $1,869.

The next significant resistance is seen at the June 14 tops of $1,878, followed by the $1,900 psychological level.

The 14-day Relative Strength Index (RSI) peeped briefly in the overbought zone but has eased slightly thereafter, suggesting that a fresh upswing could be in the making.

On the downside, the $1,850 demand area will get tested initially, below which Friday’s low of $1,845 will be the next stop for gold sellers.

The previous critical resistance now support at $1,834 will hold the key for gold bulls.

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