Gold Price Forecast: XAU/USD’s technical set up favors bears, a test of $1800 inevitable

Gold turns south despite the US dollar’s weakness.
Vaccine optimism counters stimulus hopes.
Hourly technical set up points to more losses.

Dhwani Mehta FXStreet

Gold (XAU/USD) extends Friday’s bearish momentum into a fresh week this Monday, as the sellers remain in control amid the overall market optimism, thanks to the encouraging covid vaccine rollout news worldwide. Meanwhile, no fresh updates on the likely US $1.9 trillion fiscal stimulus and broad-based US dollar weakness fail to offer any support to the gold bulls. The greenback remains on the back foot amid renewed doubts about the pace of the US economic recovery while investors await fresh cues ahead of the Retail Sales data and the FOMC minutes due later this week.

Amid holiday-thinned light trading, gold traders will also closely follow the performance of the platinum group metals (PGMs). Also, geopolitical tensions in the Middle East could be in focus, as the Saudi-led coalition fighting in Yemen intensifies.

Gold Price Chart - Technical outlook

Gold: Hourly chart

Gold’s hourly chart shows the price is on the verge of a symmetrical triangle breakdown.

An hourly closing below the rising trendline support at $1822 would confirm the downside break. At the level, the horizontal 21-hourly moving average (HMA) coincides.

Therefore, a test of the Feb 8 low of $1808 remains inevitable, below which the January 18 low of $1803 could be challenged.

The relative strength index (RSI) at 48.57 also points to more downside in the offing.

On the flip side, recapturing the powerful barrier at $1827 is critical to reviving the recovery momentum. That level is the confluence of the falling trendline resistance, 200 and 50-HMAs.

The horizontal 100-HMA at $1834 is the next relevant upside target for the XAU bulls.

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Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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