Gold Price Forecast: XAU/USD consolidates gains above $1,750 amid USD rebound

Update: Gold (XAU/USD) snaps three-day uptrend while easing to $1,766, down 0.16% intraday, during early Monday.

The US Dollar Index (DXY) rebound, amid choppy Treasury yields and mildly offered stock futures, could be held responsible for the latest consolidation in gold prices.

Although US President Joe Biden’s readiness to trim the demand over infrastructure spending initially favored market sentiment in Asia but fears that the Republicans will reject the move weighed on the risk appetite of late.

Also challenging the mood could be the news from Bloomberg citing another China property developer Fantasia that missed over $200 million of bond payments.

Adding to the anxiety over the US stimulus and China headlines, the cautious mood ahead of the Reserve Bank of Australia’s (RBA) monetary policy meeting and the US ISM Services PMI for September exert additional downside pressure on the XAU/USD prices.

End of update.

Gold (XAU/USD) holds the head high at around $1,770 during a four-day uptrend to Tuesday’s Asian session. The yellow metal cheers US dollar weakness to consolidate September’s losses while confirming a bullish chart pattern to aim for the key short-term hurdle near the $1,800 threshold.

US Dollar Index (DXY) began the week with the same old pullback moves and dropped for the third consecutive day to settle around 93.80 by the end of Monday’s New York.

While the risk-off mood and the Fed tapering chatters are still on the table, off in China and market’s search for fresh clues, as well as lack of clarity over the US stimulus and debt ceiling extension, seemed to have underpinned the DXY pullback and gold recovery moves.

Market sentiment soured as the age-old US-China tensions got an additional push after America condemned Chinese activity near Taiwan. Adding to the chapter are the comments from US Trade Representative (USTR) Katherine Tai who cited Beijing’s shortfall in meeting the phase one deal targets.

Additionally, trading suspension of the Evergrande stock in Hong Kong triggered chatters that the struggled real estate is up for selling property to pay for the debt.

In the US, Republicans rejected the Democratic push for a bipartisan agreement on the infrastructure stimulus bill and debt ceiling extension. The policymakers have until October 18, per Treasury Secretary Janet Yellen before witnessing empty pockets and fears for government offices.

It’s worth noting that the Fed tapering chatters are likely to have lost the importance of late and hence failed to underpin the US dollar even as the policymakers are optimistic. The same help gold to extend the recovery moves.

Against this backdrop, Wall Street closed in red and the US 10-year Treasury yields inched up but the US Dollar Index (DXY) remained pressured for the third consecutive day. Further, the S&P 500 Futures begin Tuesday’s trading with mild gains at the latest.

Looking forward, the US ISM Manufacturing PMI and final reading of Markit PMI for September will be important to watch for fresh impulse but the headlines concerning China and Evergrande shouldn’t be missed.

Read: US September ISM Services PMI Preview: Eyes on inflation and employment details

Technical analysis

Gold stays firmer after confirming a five-week-old falling wedge bullish chart pattern following a hawkish start to the key week.

Given the MACD line’s ability to offer a bullish cross, coupled with the confirmation of the bullish formation, gold buyers are likely to attempt power play and aim for the late September peak surrounding $1,787.

It’s worth noting that a convergence of 200-DMA and 50% Fibo. near $1,802 will be a tough nut to crack for gold buyers, a break of which won’t hesitate to challenge the $1,834 ‘double tops’.

Alternatively, pullback moves may aim for 23.6% Fibonacci retracement (Fibo.) of June-August downside, around $1,741 but the support line of the stated formation near $1,718 will challenge any further weakness of the gold prices.

In a case where gold bears keep reins past $1,718, the $1,700 threshold will test them ahead of the yearly bottom surrounding $1,687.

Gold: Daily chart

Trend: Pullback expected