Gold Price Forecast: XAU/USD gathers strength to test $1800 as USD remains vulnerable

  • Gold remains on track to challenge the $1800 barrier.
  • The USD recovery appears shallow amid subdued Treasury yields.
  • Rising covid infections, China’s boost to gold imports render XAU-positive.

Gold (XAU/USD) extended its two-day winning streak to reach fresh two-month highs at $1784 on Friday, recording the second straight weekly gains. The weakness in the US dollar induced by the tumbling Treasury yields, in the wake of dovish Fed expectations, emerged as the primary driver behind gold’s upsurge. Gold benefited from the record rally on Wall Street indices, as it weighed on the dollar’s haven demand. Meanwhile, US-Russia geopolitical tensions and the continued rise in the covid infections globally also lifted gold’s safe-haven appeal.

Starting out a fresh week on Monday, gold remains in a bullish consolidative mode near $1780 levels. The upside bias remains intact amid persistent downbeat tone seen around the US rates, which has helped limit the corrective pullback in the greenback. Reports that China has granted domestic and international banks permission to import large amounts of gold into the country could continue to offer support to the gold bulls. Looking ahead, the sentiment on Wall Street and upbeat on the US infrastructure spending plan will be closely eyed for fresh impetus.

According to Business Insider, differences over Donald Trump's salt tax cap are threatening to derail President Joe Biden’s $2.25 trillion infrastructure plan.

Gold Price Chart - Technical outlook

Gold: Hourly chart

Gold’s upside consolidation has taken the shape of a horizontal parallel channel on the hourly sticks, with a sustained break above the channel resistance at $1784 likely to trigger a fresh rally towards the $1796 measured target.

The Relative Strength Index (RSI) has turned flat but holds well above the midline at 58.12, keeping the buyers hopeful.

On the flip side, if the price closes the hourly candlestick below the upward-sloping 21-hourly moving average (HMA) at $1777 then a test of the channel support at $1773 could be in the offing.

The bullish 50-HMA support at $1766 could rescue the XAU bulls. Further down, the psychological $1750 level could challenge the bearish commitments.

All in all, the path of least resistance appears to the upside for gold.

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