Gold Price Forecast: XAU/USD nears $1,880 as USD continues to retreat

Valeria Bednarik FXStreet

XAU/USD Current price: $1,872.35

Tensions in the Middle East and decreasing expectations of a Fed hike weigh on yields.
The United States will publish the September Consumer Price Index on Thursday.
XAU/USD keeps posting higher highs, but bulls start to hesitate.

Gold price rallied on Wednesday, reaching a fresh two-week high of $1,877.19 a troy once. XAU/USD benefited from the broad US Dollar weakness, the latter linked to easing United States (US) Treasury bond yields.

Government bond yields edged sharply lower this week, partially due to resurgent demand for safety amid developments in the Middle East, but also weighed by decreasing expectations of another Federal Reserve (Fed) rate hike. Generally speaking, most policymakers believe that strong yields will offset the need for additional tightening. Despite easing these days, yields hold near the multi-decade highs posted in September.

Investors turned cautious following the US Producer Price Index (PPI) release and ahead of the FOMC Meeting Minutes. Wholesale inflation in the country rose by 2.2% YoY in September, up 0.5% in the same month. The figures were above the market expectations and also higher than the August figures. The country will publish the Consumer Price Index (CPI) on Thursday, foreseen up by 3.6% YoY.

XAU/USD short-term technical outlook

The daily chart for the XAU/USD pair shows it holds near the intraday high, with bulls retaining control. Still, the bright metal trades below a bearish 20 Simple Moving Average (SMA), which partially loses its bearish strength and provides dynamic resistance at around $1,880. Technical indicators, in the meantime, keep advancing within negative levels, reflecting persistent buying interest but falling short of suggesting a firmer, bullish trend.

The near-term picture skews the risk to the upside. XAU/USD is battling to overcome a mildly bearish 100 SMA, while the 20 SMA heads firmly north far below the current level. Meanwhile, technical indicators hold on to positive levels but lack directional strength. Even further, the Momentum indicator shows a bearish divergence, as the indicator stabilized far below the recent high.

Support levels: 1,865.35 1,853.00 1,844.10

Resistance levels: 1,879.90 1,891.40 1,904.70

View Live Chart for XAU/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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