Gold Price Forecast: XAU/USD falls below $2,000 on renewed US Dollar demand

XAU/USD Current price: $1,989.96

• United States Consumer Confidence fell by less than anticipated in October, according to CB.
• The US Federal Reserve will announce its monetary policy decision on Wednesday.
• XAU/USD is in a bearish corrective phase, not everything is lost for bulls.

Spot gold surged throughout the first half of the day but turned south in the American session, following dismal United States (US data) spurring US Dollar demand. XAU/USD peaked at $2,007.91 a troy ounce as financial markets remained optimistic during European trading hours, aided by softer-than-anticipated Euro Zone inflation figures. The EU also reported tepid growth in the third quarter of the year, as the annualized reading of the Q3 Gross Domestic Product (GDP) printed at 0.1%.

US Consumer Confidence fell by less than anticipated in October, according to CB. The index posted 102.6, down from an upwardly revised 104.3 in September. Meanwhile, the Expectations sub-index held below the recession threshold of 80, slightly contracting to 75.6 from 76.4 in the previous month. Finally, the official report notes, “Average 12-month inflation expectations increased in October to 5.9 per cent, after holding steady at 5.7 per cent for the past three months.” Wall Street gave up early gains, with the three major indexes now trading unevenly around their opening levels and backing USD demand.

Earlier in the day, the US Dollar rallied against the Japanese yen as the Bank of Japan (BoJ) was more conservative than anticipated in its tweak to the yield-curve control  (YCC). The BoJ left rates untouched, as widely expected, but also decided to increase the flexibility in the YCC, allowing the 10-year Japanese government bond (JGB) yield to rise above 1%. The central bank will anyway maintain yields limited, giving a first timid step into a policy change.

 Market players are now gearing up for the US Federal Reserve (Fed) monetary policy announcement. The central bank is widely anticipated to keep rates unchanged in its November meeting, but continued inflationary pressures alongside a tight labor market spur doubts about the end of the tightening cycle.

XAU/USD short-term technical outlook

XAU/USD trades near a fresh weekly low of $1,986.61, easing for a second consecutive day. The decline seems corrective in the daily chart, as technical indicators retreat with moderated strength from extreme overbought levels. At the same time, the bright metal keeps developing far above all its moving averages, with the 20 (Simple Moving Average) crossing a flat 100 SMA almost vertically in the $1,920 price zone.

The 4-hour chart shows technical indicators head south almost vertically just above their midlines, anticipating a downward extension without confirming it. At the same time, XAU/USD is battling with a mildly bullish 20 SMA while the longer moving averages maintain their bullish slopes far below the current level. The risk of a steeper decline should increase on a break below $1,976.83, the October 27 daily low.

Support levels: 1,976.85 1,962.10 1,947.55

Resistance levels: 2,009.50 2,023.70 2,040.20

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