Gold Price Forecast: XAU/USD bears tease five-week low near $1,750, China, Fed eyed

Gold (XAU/USD) bears regain controls ahead of the key weekly events, down 0.36% intraday near $1,748 heading into Monday’s European session. In doing so, the yellow metal refreshes the five-week low, recently bouncing off the intraday bottom, amid the risk-off mood.

Despite banking holidays in Japan and China, Evergrande-linked equity woes and the pre-Fed caution weigh on the market sentiment, which in turn underpin the US Dollar Index (DXY) and weigh on gold prices. Also challenging the mood is the COVID-19 fears and concerns over the US stimulus, as well as the debt limit.

Increasing optimism towards the US stimulus and extending US debt limits, not to forget slow but gradual economic recovery, brighten the odds of the Fed tapering and favor the pair bears in turn. Further, escalating tensions between China and the Western allies, namely the US, Australia and the UK, also weigh on the market sentiment and underpin the US dollar’s safe-haven demand.

Recently, Axios reported that US Senator Manchin back the delay President Joe Biden’s spending package vote to 2022. On the contrary, US House Speaker Pelosi said to expect a bipartisan approach to address the debt limit, per Reuters. Further, US Treasury Secretary Janet Yellen recently renewed her call for Congress to raise or suspend the debt ceiling sometime in October, Bloomberg reported, citing her editorial op-ed in the Wall Street Journal (WSJ). Hence, doubts over the US money flow and spending limits challenge the mood.

Elsewhere, fears of a Lehman-like collapse of China’s Evergrande amid $300 billion debt and 1,300 projects in over 280 cities, as well as multiple linkages abroad, challenge the sentiment.

Read: No Lehman risk with Evergrande but why is the market still worried? – The Standard

Amid these plays, S&P 500 Futures drop 0.80% intraday by the press time while the US Dollar Index (DXY) refreshes one-month high, up 0.10% on a day near 93.33 by the press time.

Looking forward, an off in China and Japan may trigger the metal’s corrective pullback near the short-term key support but the bearish view remains intact ahead of Wednesday’s Federal Open Market Committee (FOMC).

Read: The week ahead: Fed meeting, Bank of England, Canada and Germany elections, Kingfisher, Nike, Fedex

Technical analysis

Although receding bearish bias of MACD and oversold RSI line challenges gold sellers of late, a downward sloping trend line from last Wednesday, around $1,750 now, keeps them hopeful.

Hence, fresh selling awaits a clear downside break of 61.8% Fibonacci retracement of August-September recovery, near $1,744.

Following that, August 09-10 lows near $1,723 and the $1,700 round figure will challenge gold bears ahead of directing the commodity prices to the yearly low near $1,687.

Alternatively, corrective pullback beyond the stated resistance line near $1,750 will aim for the latest peak surrounding $1,768 before heading towards the late August lows near $1,780.

It’s worth noting that the $1,800 and $1,822-23 may entertain bulls prior to highlighting the monthly top, also tested in July, near $1,834.

Gold: Four-hour chart

Trend: Corrective pullback expected