Gold Price Forecast: XAU/USD recovers from near $1,900 holds near recent highs

Valeria Bednarik FXStreet

XAU/USD Current price: $1,921.25

The US Dollar eases despite Middle East tensions continuing to affect the mood.
New Zealand, Canada and the United Kingdom will release inflation updates this week.
XAU/USD retains its bullish stance in the near term, with buyers defending the $1,900 mark.

Spot Gold gapped lower at the weekly opening, retreating from a multi-week high of $1,932.61 a troy ounce to trade as low as $1,908.19 on Monday. Financial markets continue to look at the Middle East for clues as the war between Israel and Hamas escalates. Still, demand for the US Dollar receded in the European session, helping XAU/USD to recover towards the current $1,920 price zone.

The USD lost ground during European trading hours, as local stock markets performed better than their Asian counterparts, ending the day in the green. At the time being, US indexes post substantial gains, reversing a good chunk of Friday’s losses. Still, the market’s sentiment remains fragile as the economic outlook is uncertain, as well as the future of monetary policies. Most major central banks, the Federal Reserve (Fed) included, have paused tightening, although persistent inflationary pressures forced policymakers to leave the door open for additional rate hikes, regardless of the subsequent risk of an economic setback.

This week, New Zealand, Canada and the United Kingdom will report updated inflation figures, and if those signal mounting price pressures, the sentiment will likely turn sour. In such a scenario, the USD will likely outpace the bright metal.

XAU/USD short-term technical outlook

The daily chart for XAU/USD shows the metal trading at the upper end of Friday’s range but losing its bullish momentum. The pair is battling a mildly bearish 100 Simple Moving Average (SMA), while a flat 200 SMA provided resistance last week. In the meantime, the 20 SMA has lost directional strength and converges with the 50% Fibonacci retracement of the latest daily slump at $1,878.60. Finally, technical indicators hold within positive levels, although turning marginally lower, in line with the intraday retracement.

In the near term, and according to the 4-hour chart, XAU/USD retains the bullish stance after correcting overbought conditions. Technical indicators turned flat after retreating from extreme levels, but there are no other signs of upward exhaustion. At the same time, the pair develops above all its moving averages, with the 20 SMA heading north almost vertically, well above a flat 100 SMA and about to cross beyond the 200 SMA.

Support levels: 1,904.70 1,895.00 1,878.60.

Resistance levels: 1,932.60, 1,947.40 1,961.85

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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