Gold Price Forecast: XAU/USD set to test 200-DMA amid US dollar’s dead cat bounce

  • Gold eyes additional upside as the US dollar bounce fades on NFP miss.
  • Treasury yields fail to extend the recovery as dovish Fed bets weigh.
  • RSI remains bullish, a test of 200-DMA likely on the cards.

Gold (XAU/USD) registered the best week in six months after it shot to a new three-month high of $1843 on a terrible US jobs report. The headline NFP rose by just 266K vs. expectations of a 978K increase. Disappointing NFP data bolstered expectations that the Fed will remain committed to its accommodative monetary policy stance, which hammered the US Treasury yields in tandem with the dollar and lifted bullion’s appeal. However, the risk-on rally in Wall Street helped the US rates to recover ground towards the weekly closing, capping the upside in the price of gold.

Gold is on a corrective mode this Monday, but holds onto the recent gains above $1830, with the upside in check (for now) amid the US dollar’s dead cat bounce. The upbeat market mood amid vaccine optimism is underpinning the recovery in the Treasury yields, which saves the day for the dollar bulls, Although the greenback’s pullback appears shallow amid a risk-friendly market environment and dovish Fed expectations. Gold traders are taking a breather before resuming the uptrend. In absence of significant economic data from the US, gold prices will continue to remain at the mercy of the dollar and yields.

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold’s daily chart depicts that the odds remain in favor of the bulls, as they keep their sight on the 200-daily moving average (DMA) at $1851.

Ahead of that the gold price needs to take out Friday’s high of $1843.

Only a daily closing above the 200-DMA could call for a retest of the $1900 psychological barrier.

The Relative Strength Index (RSI) lies just beneath the overbought region, currently at 68.44, pointing to additional upside potential.

However, if the correction regains momentum, gold prices could fall back towards Friday’s low of $1813.

The $1800 threshold could emerge as strong support for the XAU buyers.

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