Gold Price Forecast: XAU/USD eyes a firm break above $1795 amid growing inflation fears


  • Gold price is advancing amid inflation fears, a minor US dollar pullback.
  • Gold bulls stay cautious amid higher US Treasury yields, hawkish Fed bets.
  • Rising channel hurdle on the 4H chart remains a tough nut to crack for gold bulls.

Gold price reached a four-day high at $1789 in the Asian trades and went on to consolidate the three-day advance all through the day, ending Thursday marginally higher at $1783. The two-way movements in gold price were mainly driven by the price action in the US dollar and Treasury yields price action that has been the underlying key catalysts so far this week. Resurfacing concerns over a potential default of the indebted China Evergrande Group combined with escalating inflationary fears dampened the investors’ sentiment. Mixed European corporate earnings reports added to the dour mood, triggered a rebound in the safe-haven dollar while putting a lid on gold’s upside. The near-record high close on Wall Street indices and hawkish Fed’s expectations also curbed gold bulls’ enthusiasm.

However, with the global central bankers’ underscoring growing inflation risks, gold bulls found some consolation. Gold is usually considered as a hedge against inflation, especially in light of the recent upsurge in energy prices worldwide.

On the final trading day of the week, gold bulls have regained poise, as the US dollar stalls its broad recovery and returns to the red amid improving market mood. Reports that Melbourne is heading towards reopening and US President Joe Biden hopeful to reach a deal in the infrastructure spending proposals lifted the risk sentiment. However, the main catalyst was the positive news from China Evergrande Group, with sources citing that the property development giant made an $83.5 million payment on its bond coupon on Thursday, which averted a formal default. The US rates maintain their bullish momentum, although remain off the multi-month tops.

Gold traders now look forward to the Markit Preliminary PMI reports from across the Euro area and the US for fresh signals on the economic recovery, which will likely have a significant impact on the risk tone and the dollar valuation. Fed Chair Jerome Powell’s speech will be also closely eyed as a relatively data-light week draws to an end.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Technically, nothing seems to have changed for gold price on the four-hour setup, as it continues to waver a rising channel formation.

The rising trendline resistance at $1795 will continue to offer stiff resistance for gold buyers. A sustained break above the latter will yield an upside breakout from the channel, opening doors towards the previous week’s high of $1801.

The Relative Strength Index (RSI) is trading flat but holds well above the midline, suggesting that the bullish bias remains intact. Meanwhile, the 21-Simple Moving Average (SMA) and 50-SMA bullish crossover continue to play out in favor of gold bulls.

However, rejection once again at the channel resistance could see gold price falling back towards the upward-sloping 21-SMA at $1779, below which the 50-DMA at $1777 could come into play. At that level, the rising trendline support emerges.

A four-hourly closing below the latter will confirm a rising channel breakdown, exposing the immediate support at the bearish 200-SMA at $1769. Further south, the upward-pointing 100-SMA at $1767 will get tested.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD climbs above 1.1250 as investors eye coronavirus headlines

EUR/USD preserved its recovery momentum early Friday and rose above 1.1250 during the European trading hours. Markets are doubting the Fed's policy tightening prospects as the new coronavirus variant revives concerns over the economic recovery losing steam.

EUR/USD News

GBP/USD rebounds toward mid-1.3300s on broad dollar weakness

GBP/USD reversed its direction after dipping below 1.3300 earlier in the day and started to push higher toward 1.3350. The greenback is facing heavy selling pressure amid the sharp decline witnessed in the 10-year US Treasury bond yield.

GBP/USD News

Gold clings to strong gains above $1,800 as US T-bond yields plunge Premium

Gold staged a decisive rebound on Friday and reclaimed $1,800. The intense flight to safety is causing US Treasury bond yields to fall sharply and fueling XAU/USD's rally. Investors await news on vaccines' effectiveness against the new COVID variant.

Gold News

Cardano could tank to $1 if ADA fails to defend crucial support

Cardano price is currently hovering below a freshly shattered 6-hour demand zone, ranging from $1.68 to $1.79. This resulting crash could extend to the immediate and critical foothold at $1.40. 

Read more

Black Friday 2021 Discounts!

Do you want to take your trading skills to the next level? Now you have a chance of leaping forward at attractive introductory rates. For Black Friday, FXStreet is offering discounts of up to 50% on its upgraded Premium plans. 

Subscribe now!

Majors

Cryptocurrencies

Signatures