Gold Price Forecast: XAUUSD eyes a sustained move above 21-DMA, focus shifts to Fed Minutes

• Gold Price remains firmer so far this week, with all eyes on Wednesday’s Fed minutes.
• The US dollar rebounds amid souring sentiment while Treasury yields retreat.
• Daily closing above 21-DMA could likely confirm XAUUSD’s bullish reversal.

Gold Price kept its bullish undertone intact starting out a fresh week, reaching fresh nine-day highs at $1,885 before reversing sharply to finish modestly higher at $1,854. The volatility surrounding the gold price action from the previous week continued, as the dynamics of the US Treasury yields played their part.

Meanwhile, the US dollar was smashed amid an increased appetite for riskier assets, boosting the USD-priced XAUUSD. The impressive rally in EUR/USD, following the hawkish remarks from ECB President Christine Lagarde, exacerbated the dollar’s pain. Earlier in the day, hopes for loosening of the covid restrictions in China re-ignited growth optimism global and collaborated with the extended correction in the safe-haven greenback. The bright metal took advantage of the dollar sell-off and built on the previous week’s recovery rally from four-month lows of $1787. However, the risk-on flows-driven rebound in the Wall Street indices, as well as, the US Treasury yields recalled gold sellers, which dragged the rates from multi-day highs.

What also worked in favor of Gold Price was the renewed tensions between the US and China over Taiwan after American President Joe Biden said Monday that the US may get involved militarily to defend Taiwan. In response, China’s Foreign Ministry warned the US not to underestimate its resolve on Taiwan. The geopolitical tensions likely underpinned the traditional safety bet gold.

With risk-aversion seeping back into the market this Tuesday, reflective of a 0.80% drop in the US stock futures, the precious metal remains in a consolidative phase above $1,850. Tech sell-off on Wall Street late Monday is weighing on the stock futures, sapping investors’ confidence. The return of risk-off flows is aiding a minor rebound in the US dollar and the government bonds while snapping the yields comeback.

Attention now turns towards the global Manufacturing and Services PMIs preliminary readings, which will provide fresh hints on a potential recession threat. The data releases could have a significant impact on the market sentiment and thus, the dollar and gold valuations. Besides, markets will be mindful of Wednesday’s FOMC minutes release before placing any aggressive bets on the yellow metal.

Gold Price Chart: Daily chart

The near-term technical outlook for the metal remains more or less the same. Gold bulls are challenging the 21-Daily Moving Average (DMA) hurdle at $1,857, having failed to hold ground above the latter.  

Daily closing above the latter is needed to confirm a bullish reversal, exposing the additional upside towards the mildly bullish 100-DMA at $1,885. Ahead of that the $1,870 round figure could challenge the bearish commitments.

The 14-day Relative Strength Index (RSI) is testing the midline, currently standing at 46.25, justifying the bullish bias in the price.

On the flip side, the immediate support is seen at the $1,850 psychological level. Sellers will then look out for the horizontal flattish 200-DMA at $1,839. Acceptance below the latter will trigger a fresh downswing towards the $1,800 mark.