Gold Price Forecast: XAU/USD extends recent gains in choppy trading

XAU/USD Current price: $2,016.16

• Most Asian and European indexes edged higher, indicating a better market mood.
• Financial markets await fresh clues from the Fed after hotter-than-expected US inflation.
• XAU/USD advances for a third consecutive day, could recover beyond $2,030.

Spot Gold advanced throughout the first half of Monday amid absent demand for the US Dollar, resulting in XAU/USD extending its recovery to $2,023.04 a troy ounce. The Greenback found some near term demand by the end of the European session, with the pair currently trading at around $2,016, holding on to modest intraday gains.

The week started in slow motion at the FX board as the macroeconomic calendar had little to offer, while holidays in Canada and the United States (US) weighed down the market volatility. However, Asian and European indexes provided interesting clues for speculative interest.  Chinese shares rose following the long New Year holiday, while the Nikkei 225 flirted with record highs, to end the day with modest losses. Across the pond, EU markets posted a mixed performance, with most indexes closing with modest gains, also holding near record levels.

Financial markets seem to have digested the latest US inflation figures indicating heating price pressures in the worlds’ largest economy. Both the Consumer Price Index (CPI) and the Producer Price Index (PPI) rose by more than anticipated in January, diluting the odds for a soon-to-come rate cut. Market participants are now waiting for the Federal Open Market Committee (FOMC) Meeting Minutes, to be released next Wednesday. The document could provide clues on a May potential cut, and trigger some volatile price action.

XAU/USD short-term technical outlook

XAU/USD is neutral, according to technical readings in the daily chart. The pair met sellers around a mildly bearish 20 Simple Moving Average (SMA), while extending its recovery from a bullish 100 SMA after testing it last week.  Technical indicators, in the meantime, lack directional strength just below their midlines, suggesting easing buying interest.

In the near term, and according to the 4-hour chart, XAU/USD could recover further, particularly if it resumes its advance beyond the daily high. Technical indicators have corrected lower after nearing overbought readings, but remain well above their midlines with moderated bearish strength. At the same time, the 20 SMA heads firmly north below the current level, providing dynamic support at around $2,005.20. Finally, the longer moving averages have lost their downward strength, but remain well above the current level.

Support levels: 2,005.20 1,990.00 1,976.50

Resistance levels: 2,023.10  2,032.50 2,045.20