Gold Price Forecast: XAU/USD’s recovery appears limited ahead of Powell


  • Gold holds onto the recovery gains well above $1800
  • Rising inflation expectations, retreat in US rates support.
  • Technicals suggest a limited further upside ahead of Powell’s testimony.

The retreat in the US Treasury yields from yearly tops and rising inflation expectations worldwide render supportive for the inflation-hedge gold (XAU/USD). Although markets weigh in the prospects of passage of US President Joe Biden’s $1.9 trillion, which could limit the advance in the metal. Also, the XAU bulls could turn cautious ahead of the Fed Chair Jerome Powell’s testimony on the Semi-annual Monetary Policy Report before the Senate Banking Committee due later this Tuesday.

Powell is likely to reiterate his dovish stance, exerting additional downside pressure on the US dollar. Meanwhile, the market optimism-driven by encouraging vaccine developments could likely bode ill for the safe-haven gold. All in all, gold is likely to hold onto its recovery mode, awaiting fresh cues from the US CB Consumer Confidence data and Powell’s testimony.

Gold Price Chart - Technical outlook

Gold: Hourly chart

 

Gold’s hourly chart spots a bull flag breakout, with the bullish crossover adding credence to the upside bias.

 

The 21-hourly moving average (HMA) pierced through the downward-sloping 200-HMA from below, registering a bull crossover in the last hours.

Therefore, the bulls could extend control towards the $1820 round number, above which the horizontal trendline (orange) resistance at $1825 could be challenged.

The overbought Relative Strength Index (RSI) conditions suggest that there is limited scope for advances.

Gold: Daily chart

Meanwhile, the daily chart shows that the bearish 21-simple moving average (DMA) at $1821 could cap the recovery from seven-month tops, as the RSI turns flat below the midline.

Further, an impending bear cross on the daily sticks also warrants caution for the XAU bulls. The 100-DMA is set to cross the 200-DMA from above.

Should the downside pressure regain momentum, a test of the November lows at $1765 would be back on the table. Also, the seven-month lows at $1761 could be at risk.

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