Gold Price Forecast: XAU/USD recovery needs acceptance above $1,760

Gold price has almost reversed the previous day’s losses, having recaptured the $1,750 mark amid a renewed sell-off in the United States Dollar (USD) across its main rivals. Markets brace for a turnaround Tuesday, as risk flows return on renewed optimism from China.   

China’s reopening optimism downs the United States Dollar

The three-day coronavirus lockdown-induced protests across China eased on Tuesday. Chinese equity markets rebounded firmly on expectations that the government will further relax its zero-Covid policy after the weekend protests. China’s authorities announced new property market measures while Global Times tweets suggested that the government could do away with its stringent zero-Covid policy sooner (than later). These developments from China lifted risk sentiment and triggered a sharp retreat in the US Dollar after its dramatic recovery seen on Monday. The United States S&P 500 futures rise 0.36% so far, reflecting the positive shift in the market’s perception of risk sentiment.

It’s also worth noting that China on Tuesday reported a decline in new COVID-19 infections for Nov. 28, posting 38,645 cases, after a record daily high of 40,347 cases on the previous day. Reduced safe-haven demand for the US Dollar bodes well for the USD-sensitive Gold price.

US Treasury bond yields cheer hawkish Federal Reserve speeches

The further recovery in Gold price could be capped by the buoyant tone seen around the US Treasury bond yields, which recovered sharply on Monday after the hawkish commentary from the United States Federal Reserve officials. James Bullard, President of the Federal Reserve Bank of St. Louis, said that rates need to go higher to bring inflation down. New York Fed Bank President John Williams said that  "I do think we're going to need to keep the restrictive policy in place for some time; I would expect that to continue through at least next year.” Meanwhile, Richmond Fed President Thomas Barkin noted that "I'm very supportive of the path that is slower, probably longer and potentially higher.”

These hawkish remarks lifted the US Treasury bond yields while fuelling a solid comeback in the US Dollar. Gold price, therefore, closed Monday deep in the red near the $1,740 demand area.

Gold price technical outlook: Daily chart

Gold price failed to resist above $1,747 on Monday, which is the 23.6% Fibonacci Retracement (Fibo) level of the latest rally from the November 3 bottom at $1,617.

The move lower also prompted Gold price to settle the day below the rising (dashed) trendline support, then at $1,744.

Buyers, however, found support once again near the $1,740 region, triggering a recovery rally above the $1,750 level this Tuesday.

In doing so, Gold price has recaptured the 23.6% Fibo level and the rising trendline support-turned-resistance, now at $1,747 and $1,749 respectively.

The next upside barrier is seen at the $1,760 round figure. Acceptance above the latter is critical to unleashing the additional recovery toward $1,770.

The 14-day Relative Strength Index (RSI) is inching higher above the midline, justifying the renewed upside.

On the flip side, the downside will likely remain cushioned so long as the $1,740 mark is defended. The bullish 21-Daily Moving Average (DMA) at $1,728 will be next in play.

The $1,722 strong support will be the level to beat for Gold bears. That level is the confluence of the 38.2% Fibo level and the November 23 low.