Gold Weekly Forecast: XAU/USD looks poised to retreat toward $1,875

The troy ounce of gold lost nearly $30 on Tuesday and struggled to recover those losses in the remainder of the week. Although XAU/USD closed in the positive territory on Wednesday and Thursday, it failed to preserve its bullish momentum and turned south on Friday. Toward the end of the American session, the pair was down 0.4% and 1.5%, on a daily and weekly basis, respectively.

What happened last week

In the absence of significant macroeconomic data releases from major economies during the first half of the week, investors remained focused on US politics, coronavirus headlines and developments surrounding Brexit negotiations.

US Treasury Secretary Steven Mnuchin acknowledged that it will not be easy to reach a deal with Democrats on the next coronavirus relief bill before the presidential election and noted that politics were getting in the way of the next aid package. 

Meanwhile, French President Emmanuel Macron announced that they will start imposing nightly curfews in major cities from Saturday for four weeks to limit the spread of coronavirus in the country. Moreover, the British government said that they raised the alert level in London to 'high' and German officials said they are looking to re-introduce coronavirus-related restrictions. Finally, Italy reported its highest one-day increase in confirmed coronavirus cases in the country with 10,010 on Friday.

Wİth regards to Brexit negotiations, officials on both sides adopted an optimistic tone earlier in the week and voiced their willingness to work toward a deal. However, the press conference on Thursday revealed that the UK and the EU failed to make progress on key issues such as fishing and level playing field and will continue negotiations for a few more weeks. On Friday, British Prime Minister Boris Johnson called upon business in the UK to prepare for an Australia-style trade deal with the EU. Nevertheless, the EU's chief Brexit negotiator, Michel Barnier, will be meeting with his British counterpart David Frost in London next week. 

These developments weighed on the market mood and caused global equity indexes to perform poorly. Safe-haven flows provided a strong boost to the greenback rather than gold and caused XAU/USD to remain under bearish pressure.

Next week

With US stimulus talks coming to a halt and Brexit negotiations set to continue for a few more weeks, coronavirus headlines, especially from Europe, are likely to impact risk sentiment next week and USD could continue to capitalize on flight-to-safety.

On Monday, Industrial Production and Gross Domestic Product (GDP) data will be released from China. Even if these figures point out to a robust recovery in the world's second-biggest economy, a positive shift in risk perception is likely to remain short-lived. On Friday, the IHS Markit's preliminary October Manufacturing and Services PMI reports for the UK, the euro area and the US will be the last significant macroeconomic data releases of the week. 

Gold technical outlook

On the daily chart, the RSI indicator stays a little below 50, confirming that the recovery witnessed in the second half of the week struggled to gather bullish momentum. Additionally, XAU/USD continues to trade below the 50-day SMA since its bearish cross with the 20-day SMA in late September.

On the downside, the initial support aligns at $1,895 (20-day SMA) ahead of the key support that seems to have formed at $1,875 (Fibonacci 50% retracement of June-August uptrend/100-day SMA). A daily close below that level could open the door for further losses toward $1,848 (September 28 low). 

Resistances, on the other hand, are located at $1,920/25 (50-day SMA/Fibonacci 38.2% retracement), $1,950 (static resistance) and $1,980 (Fibonacci 23.6% retracement).

Gold sentiment poll

Despite the fact that XAU/USD seems to be having a difficult time making a decisive rebound, the FXStreet Forecast Poll shows that experts expect the precious metal to edge higher in the near-term. However, the weekly outlook and the monthly outlook point out to average target levels of $1,914 and $1,919, respectively, suggesting that gains are likely to be limited.