Gold Price Forecast: XAU/USD to maintain range play around $1800 ahead US PCE inflation

  • Gold price looks to stabilize around $1800 after a volatile Thursday.
  • The US dollar licks GDP-inflicted wounds amid yield curve flattening.
  • Gold price to waver within a pennant formation ahead of the key US data.

Gold price hit the highest levels so far this week at $1810 in early American trading after wavering around $1800 almost throughout the first half of Thursday. The bulls, however, failed to hold at four-day highs and quickly surrendered the majority of the gains, as gold price settled moderately higher at $1799. The US yield curve flattening and dovish ECB policy stance kept the buoyant tone intact in the traditional safe-haven gold while it was the big miss on the US Q3 GDP data that fuelled the rally to the $1810 highs. The US economy grew 2% QoQ in Q3 vs.2.7% expectations, smashing the US dollar across the board. Softer US growth numbers raised doubts over the pace of the Fed’s monetary policy normalization. Wall Street indices cheered reduced expectations of earlier Fed rate hikes, prompting the retreat in gold price below $1800.

Gold price is consolidating in a narrow range around $1800, contemplating the next move heading into the critical US PCE Price Index, which is the Fed’s most favorite inflation gauge.  Next week, however, the Fed’s tapering is almost priced into the market and, therefore, the reading may not have much impact on gold, unless there is a big deviation from the market consensus. The yield curve flattening and the dollar dynamics will continue to influence gold price, with investors awaiting the German and Eurozone GDP report for fresh trading impetus. The Eurozone inflation data will be also closely followed.

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold’s daily closing below the $1800 threshold yet again has brought a sense of caution for bulls.

Sellers continue to jump in at higher levels while buyers continue to protect the downside over the past fortnight, forming a pennant on the daily sticks.

The 14-day Relative Strength Index (RSI) has turned flat while holding above the midline, keeping the buyers hopeful.

For a decisive break to the upside, gold price needs a daily closing above the falling trendline resistance at $1809.

If that happens, then a pennant breakout will get confirmed, opening doors towards the previous week’s high of $1814.

The next relevant resistance for gold bulls is envisioned at the September month highs of $1834.

On the flip side, strong support is seen at the 200-Daily Moving Average (DMA) at $1792, below which the $1788 will test the bullish commitments. At that level, the mildly bearish 100-DMA coincides with the rising trendline support.

A sustained move below the latter could validate a downside breakout from the pennant, with immediate cushion awaiting at the horizontal 50-DMA at $1781.

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