Gold Price Forecast: XAU/USD bulls looking to seize control near $1,800 mark

Gold gained traction for the fourth successive day and shot to the $1,800 neighbourhood, back closer to one-month tops heading into the North American session on Friday. The momentum was exclusively sponsored by the emergence of fresh selling around the US dollar, which tends to underpin demand for the dollar-denominated commodity. The USD downtick lacked any obvious fundamental catalyst and remained limited amid elevated US Treasury bond yields. This, along with a generally positive tone around the equity markets, might keep a lid on any further gains for the safe-haven XAU/USD.

The yield on the benchmark 10-year US government bond held steady near the 1.70% threshold, or the highest level since May amid expectations for an early policy tightening by the Fed. The FOMC meeting minutes released last week reaffirmed that the US central bank remains on track to begin rolling back its massive pandemic-era stimulus by the end of this year. The markets have also been pricing in the possibility of an interest rate hike in 2022 amid worries about a faster-than-expected rise in inflation. This further contributed to the recent spike in bond yields.

Meanwhile, reports indicated that the Bank of Japan is discussing phasing out the COVID-19 loan program if infections in the country continue to dwindle. Apart from this, the Bank of England officials have signalled about an imminent interest rate hike later this year. This, in turn, should act as a headwind for the non-yielding gold, warranting some caution before placing aggressive bullish bets amid the dominant risk-on mood in the markets. The global risk sentiment got a boost amid easing concerns about a credit crunch in China's real estate sector

China Evergrande Group made funds available on Thursday for a bond coupon originally due on September 23 and averted a default. The heavily indebted developer, however, announced on Friday it has not made substantial progress in disposing of the real-estate giant's assets. The group further noted that it cannot guarantee it will be able to continue to meet the financial obligations under contracts. This seemed to be a key factor that provided an additional lift to gold prices over the past hour or so.

Friday's key focus would be on Fed Chair Jerome Powell's remarks during a virtual panel discussion later this Friday. This, along with the US bond yields and flash US Manufacturing/Services PMI prints for October, should influence the USD price dynamics. Apart from this, the broader market risk sentiment might further contribute to producing some meaningful trading opportunities around gold.

Technical outlook

From a technical perspective, a sustained strength beyond the $1,800 mark will confirm a near-term bullish breakout through the 100/200-day SMAs confluence hurdle. This will set the stage for a further near-term appreciating move for gold and push spot prices to the next relevant resistance near the $1,816-18 region. The momentum could further get extended towards challenging a key barrier near the $1,832-34 heavy supply zone.

On the flip side, the $1,789-88 region now seems to protect the immediate downside ahead of the daily swing lows, around the $1,783-82 zone. This is followed by support near the $1,775 level and the $1763-60 region, which if broken will negate any near-term positive bias. The XAU/USD might then turn vulnerable to break below the $1,750 support and accelerate the fall towards September monthly swing lows, around the $1723-21 region.

Levels to watch