Gold Price Forecast: XAUUSD has room to recover before the next downswing kicks in

Gold Price recovers from Friday’s slump but not out of the woods yet.
Holiday-thinned trading could trigger fresh validity around the bright metal.
The daily technical setup suggests that the downside remains favored for XAUUSD.

Dhwani Mehta FXStreet

Gold Price is recovering from a roughly $20 fall seen on Friday, as the US Treasury yields retreat across the curve, lifting off the bullish pressure on the dollar. The market mood remains upbeat amid Beijing and Shanghai covid easing while a slowdown in the Chinese services sector downturn also helped investors stay hopeful. The return of risk-on flows added to the dollar pullback, boding well for the USD-priced precious metal.

The so-called inflation hedge, gold, also capitalized on the latest upswing in oil prices, as it re-ignited inflation worries. The output pump by the OPEC and its allies (OPEC+) seems to have done little to stem the upsurge in oil prices, which was triggered by news that US President Joe Biden’s trip to Saudi Arabia got postponed. Also, reports that Saudi hiked oil prices, boosted the black gold.

Amidst holiday-thinned liquidity likely to play out in the day ahead, XAUUSD will remain at the mercy of risk trends and the Fed expectations, which will impact the dollar valuations. Thinner liquidity could exaggerate the price action in gold price, as well.

In absence of first-tier economic releases on Monday, investors will continue assessing the upbeat US NFP and wage growth numbers, which fuelled the dollar recovery on Friday while the Wall Street indices tanked. The stronger-than-expected headline payrolls print revived aggressive Fed tightening expectations, knocking the non-interest-bearing gold price.

Gold Price Chart: Daily chart

Despite the renewed upside, the daily technical setup continues to paint a bearish picture for gold price.

The bearish 50-Daily Moving Average (DMA) is set to cross the horizontal 100-DMA for the downside. If that happens, it will confirm a bear cross, reviving the selling interest in the metal.

With a strong support at $1842, the confluence of the bearish 21-DMA and horizontal 200-DMA will be put at risk.

Acceptance below the latter on a daily closing basis will call for a test of the previous week’s low of $1,829.

Further south, the $1,820 round figure will likely guard the downside.

The 14-day Relative Strength Index (RSI) remains below the midline but attempts an advance, justifying the rebound in the price.

If buyers manage to extend control, then a retest of the $1,860 level will be in the offing. The next significant bullish target is aligned at the end of May highs around $1,870.

Friday’s high at $1,874 will be a tough nut to crack for XAU bulls.

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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