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Gold Price Forecast: XAU/USD slipping below Monday's close ahead of RBA

  • Gold struggles to extend Monday’s rebound near short-term resistance line.
  • Market sentiment dwindles ahead of the key central bank events.
  • Inflation concerns remain elevated despite recently mixed clues, Sino-American trade deal, US stimulus favored buyers of late.
  • Gold Price Forecast: Cautious optimism underpins the metal

Update: Gold (XAU/USD) has started to drift away to the downside from the close of Monday and resistance, trading down 0.12% at the time of writing. The price has travelled from a high of $1,793.37 to a low of $1,789.52. The US dollar, meanwhile, hovers below recent highs as traders get set to the first of a number of central bank meetings this week.

The  Reserve Bank of Australia is coming up which could cause some volatility in frex, the US dollar and ultimately shift some gears in the precious metals market also. ''Today’s RBA meeting will be crucial for domestic pricing, as markets expect the RBA to address the recent repricing in the front end, and whether they will change the 2024 guidance and drop YCC,'' analysts at Westpac explained.

However, the key meeting will be with the Federal reserve mid-week which would be expected to impact the precious metals market the most. ''The Fed should continue to signal that this period of elevated inflation will be largely reflecting transitory factors, but the chair will likely emphasize how tapering will lead to flexibility in responding if the economy evolves in a way that deviates significantly from expectations,'' analysts at TD Securities explained. With all that being said, however, the major event for the week could well fall with the US jobs market on Friday as traders scrutinise the data for clues as to when the Fed might start to raise rates.

End of update

Gold (XAU/USD) remains shy of $1,800 despite Monday’s rebound, hovering around $1,790 amid early Tuesday’s Asian session. The yellow metal cheered recovery in the market’s mood and softer US dollar to consolidate Friday’s losses the previous day. However, cautious sentiment during the run-up to the key central bank meetings seems to challenge the metal’s immediate moves.

US President Joe Biden’s commitment to getting the multi-billion dollars worth of economic stimulus through the Senate this week underpinned the traders’ optimism earlier in the week.

Following that, comments from US Treasury Secretary Janet Yellen added to the market’s mild risk-on mood. The ex-Fed Boss Yellen hinted that the US-China Phase One trade deal and reciprocal easing of tariffs may tame inflation. The same highlights optimism towards reaching the much-awaited trade agreement among the world’s top two economies. Also favoring the risk-on mood could be US Treasury Secretary Yellen’s statements like, “I don’t think US economy is overheating.”

Additionally, a fourth consecutive daily fall in the US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also tamed tapering tantrums and helped gold buyers too. It's worth noting that the inflation gauge jumped to the highest since 2006 before portraying the latest pullback. On the same line was the US PMI data as the ISM Manufacturing PMI eased below the previous readings in June whereas the Markit PMIs also dropped past 59.2 market consensus and preliminary forecast for October.

However, the Fed Clevland’s version of the median PCE Inflation rate rockets higher of late, allowing the US Federal Reserve (Fed) hawks to remain hopeful.

That being said, firmer Wall Street benchmarks around the record tops and sluggish US Treasury yields printed positive mood on Monday but the recently downbeat S&P 500 Futures portray cautious sentiment and probe the gold buyers.

Moving on, inflation and central bankers remain hot topics for this week while headlines concerning the US-China trade deal and infrastructure spending package may offer additional filters to direct short-term gold moves.

Technical analysis

Having reversed Friday’s monthly support line break on Monday, gold pokes the support-turned-resistance, also keeping the bounce off 100-SMA, inside a weekly descending trend channel of late.

Given the firmer RSI conditions, not overbought, coupled with the MACD line teasing buyers, the upside momentum seems ready to overcome the bearish chart pattern with an upside break of $1,800 hurdle.

Following that, October’s peak near $1,813 will test the gold buyers ahead of fueling the run-up towards the key $1,834 resistance level, comprising tops marked during July and September.

Meanwhile, 100-SMA surrounding $1,781 restricts pullback moves before the channel’s support and 200-SMA offers a tough nut to crack for the gold sellers around $1,768.

During the quote’s weakness past $1,768, multiple supports near $1,745 will test the gold bears before directing them to the previous month’s bottom of $1,721.

Gold: Four-hour chart

Trend: Further recovery expected

Additional important levels

Overview
Today last price1792.5
Today Daily Change9.13
Today Daily Change %0.51%
Today daily open1783.37
 
Trends
Daily SMA201777.37
Daily SMA501781
Daily SMA1001787.31
Daily SMA2001792.36
 
Levels
Previous Daily High1801.24
Previous Daily Low1772.03
Previous Weekly High1810.47
Previous Weekly Low1772.03
Previous Monthly High1813.82
Previous Monthly Low1746.07
Daily Fibonacci 38.2%1783.19
Daily Fibonacci 61.8%1790.08
Daily Pivot Point S11769.85
Daily Pivot Point S21756.34
Daily Pivot Point S31740.64
Daily Pivot Point R11799.06
Daily Pivot Point R21814.76
Daily Pivot Point R31828.27

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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The US Dollar fell. Gold didn't rally. That tells you everything
Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.