Gold Price Forecast: XAU/USD remains propped up by geopolitics

Persistent concerns in the geopolitical landscape encouraged market participants to increase their positions in the precious metal on turnaround Tuesday, a move that came in response to swelling effervescence in the Russia-Ukraine front and as a direct answer to bouts of demand for the safe haven universe.

Against that backdrop, prices of the troy ounce of the yellow metal advanced further north of the recently broken $2,600 mark, meeting immediate hurdle at the interim 55-day SMA in the $2,640 zone for the time being.

In addition, Gold's rebound appears bolstered by a vacillating price action in the US Dollar (USD) as markets reassess the strength of the Trump-era rally. Additionally, the widespread loss of momentum in US Treasury yields across various maturities has also offered the metal further chances to recover.

It is worth noting that the resurgence of tensions on the geopolitical front came in response to reports over the weekend that the Biden administration has authorized Ukraine to use US-made weapons to strike Russian territory.

Looking ahead, this week’s focus will shift to key economic data releases globally, with preliminary PMIs expected to take center stage in the first turn. Comments from central bank officials are also likely to draw attention, especially following Fed Chair Jerome Powell’s remarks last week, where he reiterated the Fed’s cautious approach to further rate cuts, citing the resilience of the US economy.

Shifting the optics, non-commercial players (speculators) reduced their net long positions in Gold to approximately 236.5K contracts as of November 12, the lowest level since early June, according to the latest CFTC report. This decline coincided with a second consecutive drop in open interest, which could in turn morph into a signal that the recent downtrend in the commodity could start losing momentum.

XAU/USD short-term technical outlook

The daily chart for XAU/USD shows a clear break above the bullish 100-day Simple Moving Average (SMA) near $2,550, an area close to November’s low of $2,536. Further up, the so far weekly high around $2,540 (November 19) coincides with the transitory 55-day SMA, reinforcing this initial resistance zone. Up from here, the next minor target emerges at the weekly high of $2,749 (November 5).

On the other hand, a quick breach of the temporary 100-day SMA at $2,551 should shift the attention to the November bottom of $2,536 (November 14).

In the short term, the 4-hour chart suggests that the ongoing recovery has more room to run. The Relative Strength Index (RSI) has bounced but faces resistance around the 62 region, while the Average Directional Index (ADX) at 32 indicates a lack of strong trend momentum for the time being.

On the upside, the next resistance levels to watch are $2,639, followed by the more significant 200-SMA at $2,678 and the 100-SMA. On the downside, support remains firm at $2,536, a key level to watch if prices reverse course.