Gold Price Forecast: XAU/USD eyes $1980 amid weaker dollar, focus shifts to Wednesday’s FOMC

Gold regains poise, as the risk-recovery downs the US dollar.
Upbeat Chinese data, vaccine hopes and fresh US-Sino optimism lift the mood.
Growing Brexit risks to underpin Gold ahead of US data, FOMC decision.

Dhwani Mehta FXStreet

Gold (XAU/USD) built on Monday’s 1% rally after a steady start on Tuesday, reaching fresh nine-day highs at $1967. The US dollar was dumped across the board amid an improvement in the risk-sentiment, courtesy of the vaccine hopes, upbeat Chinese data and renewed US-Sino trade optimism. The Chinese activity numbers came in stronger than the estimates, suggesting the economic recovery is gathering steam. Also, news that China extended tariffs exemptions on some of the US good imports further fuelled the market optimism.

Traders now look forward to the US Industrial Production data and the sentiment on Wall Street for fresh trading impetus. Dovish Federal Reserve (Fed) expectations ahead of Wednesday’s monetary policy decision could also bode well for the XAU bulls.

Gold: Short-tern technical outlook

Hourly chart

A bull flag confirmation on the hourly chart calls for a test of $1979 in the sessions ahead. The price broke through the pattern resistance at $1957 and rallied $10 to surpass last Thursday’s high of $1966.54.

The hourly Relative Strength Index (RSI) peeps into the overbought territory, currently at 71.20, suggesting extra room for the upside. The bullish crossover of 21-hourly Simple Moving Average (HMA) and 50-HMA overnight adds credence to the fresh leg higher in the bright metal.

The path of least resistance is to the upside, as the next target for the bulls awaits at $1970. The price trades above all the major HMAs.

To the downside, Monday’s high of $1962 will offer immediate support on any pullbacks. A break below which the aforementioned pattern resistance now cushion could limit the losses. The next cap is seen at the bullish 21-HMA at $1955.

Acceptance below the latter could intensify the bearish pressure, opening floors towards the upward-sloping 50-HMA, now at $1949.

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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