Gold Price Forecast: XAU/USD consolidates above $1,800, markets await technical breakout

Update: After rising to its strongest level since August 5 at $1,809.59 in the early trading hours of the American session on Tuesday, good lost its bullish momentum and not looks to close the day flat around $1,805. The upbeat market mood seems to be keeping gold's gains limited while making it difficult for the USD to outperform its rivals. Earlier in the day, the data from the US showed that New Home Sales rose by 1% in July, compared to analysts' estimate for a decrease of 2.7%. On a negative note, the Richmond Fed Manufacturing Index declined to 9 in August from 27 in July but this print had little to no impact on market sentiment.
 

Gold gained some positive traction during the early North American session and climbed to near three-week tops, around the $1,809 area in the last hour, albeit lacked follow-through. Worries that the continuous surge in the Delta variant infections could threaten the global economic recovery. The concerns drove some flows towards traditional safe-haven assets, including gold.

Meanwhile, the worsening COVID-19 situation in the US might have convinced investors that the Fed would wait for a longer period before rolling back its pandemic-era stimulus. This, in turn, kept the US dollar bulls on the defensive and further extended some support to the XAU/USD. A weaker USD tends to benefit dollar-denominated commodities, including gold.

That said, a positive opening in the US equity markets and an uptick in the US Treasury bond yields capped the upside for the non-yielding gold. The global risk sentiment got a lift after China said that it had stopped the community spread of COVID-19. Adding to this, the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine and further boosted investors' appetite for perceived riskier assets.

Moreover, investors also seemed reluctant, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. This was seen as another factor that held investors from placing aggressive bets around gold. Powell's comments might influence the market expectations about the next policy move by the Fed and help determine the next leg of a directional move for the precious metal.

Technical analysis

From a technical perspective, gold, so far, has struggled to break through an important confluence hurdle near the $1,811-12 region, comprising 100-day and 200-day SMAs. This should now act as a key pivotal point for short-term traders. Given that technical indicators on the daily chart have been gaining positive traction, some follow-through buying has the potential to lift the commodity back towards the $1,832-34 supply zone. The mentioned region marks the double-top resistance, which if cleared decisively will be seen as a fresh trigger for bullish traders.

On the flip side, fall below the $1,800 mark might attract some buying near the $1,787-85 region. This is closely followed by support near the $1,775 horizontal level. Sustained weakness below will shift the bias in favour of bearish traders and accelerate the slide towards the $1,752-50 support. The next relevant support is pegged near the $1,729-28 region, below which gold might turn vulnerable to retest sub-$1,700 level, or monthly lows touched on August 9.