Gold Price Forecast: XAU/USD eyes dead cat bounce towards $1,830 amid oversold RSI, focus on yields

Gold bulls coming up for the last dance ahead of Wednesday’s Fed minutes.
Jerome Powell’s renomination ramps up Fed’s tapering and tightening bets.
Gold rebounds from 200-SMA amid oversold RSI on the 4H chart, focus on yields, PMIs.

Dhwani Mehta FXStreet

Gold price extended the previous week's bearish momentum into Monday, eroding 2% to hit the lowest levels in three weeks at $1,802. Gold price managed to recover modestly to finish at $1,805 but remained much below the daily highs of $1,849. The bright metal opened the week on the wrong footing and consolidated at lower levels around $1,840 almost throughout the first half of the trading day before a fresh selling wave swept gold bulls off their feet in the American trading.

This occurred after US President Joe Biden nominated Jerome Powell as the Fed Chair for the second four-year term. Powell’s renomination sealed the deal for a hastened taper timeline and sent the US dollar through the roof alongside the Treasury yields. The benchmark 10-year yields recaptured the 1.60% level, rising over 4% on a daily basis, weighing heavily on the non-interest-bearing gold. Upbeat US Chicago National Activity Index and Existing Home Sales data added to the greenback’s strength, exacerbating the pain in the metal, as negative close on Wall Street overnight also failed to offer any respite to gold optimists.

On Tuesday, gold price is nursing losses while above the $1,800 mark, consolidating the biggest daily loss since September 16. The US dollar is holding onto its recent upsurge, taking a breather before contemplating the next big move, as the Asian equities trade mixed, awaiting fresh hints on the Fed’s monetary policy normalization. Meanwhile, the renewed covid curbs in Europe also keep investors on the edge while the safe-haven dollar afloat. The minor pullback in the Treasury yields is offering gold bulls some thin air to come up amid looming China’s property sector woes.

Attention now turns towards the Preliminary Manufacturing and Services PMI reports from across the euro area and the US for fresh insights on the pace of the global economic recovery. The data could have a significant impact on the broader market sentiment, in turn, affecting the dollar valuations and gold price.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold price has bounced off the critical 200-Simple Moving Average (SMA) at $1,805 on the four-hour chart, having tested fresh bids below the latter on Monday.

The Relative Strength Index (RSI) trades flat within the oversold region, suggesting that a brief bounce cannot be ruled out.

If the bears continue to take a breather, then gold price could extend its rebound towards the horizontal 100-SMA at $1,830.

However, should gold sellers defy the oversold conditions, the price could resume its downtrend to retest the 200-SMA.

A four-hourly candlestick closing below the latter will open floors towards early November levels around $1,785.

The gold price action is likely to remain rangebound heading into Wednesday’s US data dump and Fed minutes. Due to the Thanksgiving Day holiday on Thursday, the US GDP, Durable Goods and PCE inflation data will be released this Wednesday.

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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