Gold Price Forecast: XAU/USD torn between vaccine woes and dollar strength, awaits a clear direction

  • Gold wavers within familiar ranges after Tuesday’s volatility.  
  • Vaccine concerns appear to offset broad dollar strength.
  • Awaits a range breakout, as the focus shifts to the ECB decision.

Gold (XAU/USD finished Tuesday with modest gains, having return to its recent trading range around $1930 after the wild swings. The bright metal slipped to the lowest level in two weeks at $1906 in the first half of the day amid unabated US dollar demand across the board. However, the bulls returned with pomp and show after the US indices tumbled amid sell-off in tech stocks and worries over the coronavirus vaccine. Pharma company AstraZeneca announced a halt in its vaccine trials over safety concerns, which dashed hopes of a swift recovery from the pandemic and weighed soured the risk sentiment. The omnipresent US-China tensions, this time over the US plans to ban cotton products, and US fiscal deadlock also aggravated the risk-off mood.

So far this Wednesday, gold extends its range play around $1930, divided between concerns over the vaccine and a broadly bid US dollar. Meanwhile, mounting no-deal Brexit fears and dovish expectations from the European Central Bank (ECB) monetary policy decision, due on Thursday, also keep the gold traders on the edge. The sentiment on Wall Street will emerge as a key catalyst in absence of relevant US macro news this Wednesday.

Gold: Daily chart

fxsoriginalOn the daily chart, gold continues to traverse within a symmetrical triangle pattern since early August and now looks primed for a range breakout.

Over the past month, the price has remained trapped between the 21-day Simple Moving Average (DMA) to the upside while the 50-DMA cushions the downside.

Therefore, investors await a strong catalyst to dive out of the range in either direction. The 14-day Relative Strength Index (RSI) has turned absolutely flatlined since the start of this week, although holds a mild bearish bias around 48.50.

A daily closing below the rising trendline support at $1925 will confirm the triangle pattern and open floors for a test of the $1900 mark. The next downside cap is seen at $1863 (August 12 low).

Alternatively, recapturing the 21-DMA at $1946 on a daily closing basis is critical to negate the ongoing bearish bias.


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