Gold Price Forecast: XAU/USD needs to defend 21-day SMA at $1,975 to sustain the upside

Gold price is maintaining its corrective decline from a ten-day high of $1,993 set on Friday, searching for a clear directional impetus at the start of a new week on Monday. Risk sentiment is likely to remain the key driver behind the Gold price action, in the absence of top-tier US economic data and Fedspeak.

Gold price to take cues from risk trends, US Treasury bond yields

Risk sentiment remains in a sweeter spot early Monday, underpinned by China’s stimulus optimism and upbeat corporate earnings reports from Japan. Even though the People’s Bank of China (PBOC) left the Loan Prime Rate (LPR) unchanged at 3.45% in November, a rebound in China’s property stocks lifted the overall market mood after Chinese regulators pledged to provide more policy support to the beleaguered real estate sector.

The market optimism combined with increased bets for US Federal Reserve (Fed) interest rate cuts next year aggravated the US Dollar weakness across the board, lending some support to Gold buyers. However, the renewed upside in the US Treasury bond yields on improved sentiment is acting as a headwind to the Gold price, limiting its upside attempts.

Looking ahead, Gold price is likely to take cues from the dynamics of the US Dollar and the US Treasury bond yields, as the US economic docket lacks any high-impact economic releases or scheduled speeches from Fed policymakers. Further, the US Dollar price action also hinges on the sentiment around the USD/JPY pair, as a further correction in the latter could exacerbate the pain in the Greenback, helping Gold price stay afloat.

On Friday, Gold price hit a fresh ten-day high but pulled back sharply to end the day modestly flat, despite a sell-off in the US Dollar, as the benchmark 10-year US Treasury bond yields staged a solid rebound from two-month lows. A slew of speeches from the Fed officials suggested that the Fed should adopt a patient stance on interest rates, maintaining the bearish pressure on the US Dollar.

However, the end-of-the-week flows and profit-taking amid the recent upsurge, triggered a sharp pullback in Gold price last Friday.

Gold price technical analysis: Daily chart

Gold price is challenging bearish commitments while flirting with the 21-day Simple Moving Average (SMA) at $1,975, having pulled back sharply from multi-day highs on Friday.

A failure to defend the latter on a daily closing basis could fuel a fresh downtrend toward the static support in the $1,955-$1,950 region.

Additional declines could challenge the ascending 200-day SMA at $1,938. Ahead of that, the November 14 low at $1,944 could come to the rescue of Gold buyers.

The 14-day Relative Strength Index (RSI) is inching lower but still remains above the midline, suggesting that any downtick is likely to be temporary.

The immediate upside barrier is seen at the descending trendline resistance of $1991, above which Friday’s high of |$1,993 will be retested.

 Acceptance above the latter will fuel a fresh advance for Gold price toward the $2,000 mark.

(This story was corrected on November 20 at 10:25 GMT to say that Risk sentiment remains in a sweeter spot early Monday, underpinned by China’s stimulus optimism, not undermined.)