Gold Price Forecast: XAU/USD eyes Friday’s close, US stimulus hopes down the dollar

Gold (XAU/USD) extends its bullish momentum into a third straight day on Friday, finally breaking through the $1900 mark while adding 1% on the day. The main catalyst behind gold’s rally remains the persistent downward pressure on the safe-haven US dollar, as the stimulus hopes continue to underpin the investors’ sentiment alongside the global stocks. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin restarted the stimulus talks Thursday after President Donald Trump rejected Pelosi’s $2,4 trillion stimulus offer late Tuesday.

Meanwhile, Trump’s likely return to the public engagements combined with hopes of a Joe Biden win at the November Presidential election bolsters the market mood, adding to the weight on the greenback. A Biden presidency could imply the likelihood of a large stimulus package. In evidence of increased investor confidence in the bright metal, Gold-backed exchange-traded funds (ETFs) amassed over 1,000 tonnes of bullion in the first nine months of 2020. 

Towards the weekly closing, the optimism over the US stimulus and sentiment on Wall Street will continue to influence the dollar trades, in turn, impacting the USD-denominated gold. Note that the price briefly regained the $1900 level on Thursday but failed to settle above the latter.

Gold: Short-tern technical outlook

Daily chart

The technical set up for gold looks interesting, with the price on the verge of confirming a falling wedge breakout should it close Friday above the falling trendline resistance at $1909.

At that level, the 21-Daily Moving Average (DMA) also coincides, making it imperative for the bulls to battle it out. Backing the case for the bullish move, the 14-day Relative Strength Index (RSI) has pierced through the midline, currently trading at 50.28.

On a bullish breakout, the immediate resistance of 50-DMA at $1939 could test the bulls’ commitment, as the metal heads towards the record highs of $2075.

Alternatively, the bears could regain control on a failure to validate the pattern, opening floors for a retest of the critical 100-DMA support at $1862.