Gold Price Forecast: XAU/USD bulls on the verge of a significant breakout


  • Gold is on the verge of a significant bullish turnaround, but it all depends on the Fed.
  • Technically, the bulls need to hang on above hourly support and break a daily H&S neckline. 

The gold price is higher by some 0.70% on the day as the US dollar continues to bleed out in a risk-on environment following the Bank of Canada's dovish rate hike ahead of next week's Federal Reserve interest rate decision. US bond yields have slipped on expectations that the Federal Reserve will temper its aggressive rate-hike stance starting December which has enabled the precious metal to firm up within a broader bearish technical picture.

DXY and yields on the backfoot

At the time of writing, XAU/USD is trading at $1,665 having travelled between a low of $1,649.81 the low and $1,675.00 the high. The DXY, an index that measures the greenback vs. a basket of currencies is losing some 1.00% on the day having dropped from a high of 111.135 to a low of 109.649 while the US 10-year yield is down 1.95% from a high of 4.113%, clinging on to 4%, just a touch above the lows of 3.997% as it moves in on technical support: 

This Benchmark has now dropped to a one-week low, but the bond market might not be too hasty to totally write off a hawkish Fed and price in a Fed pivot entirely until the outcome of next week's meeting. This leaves the M-formation compelling on the daily charts as a reversion pattern that coexists with critical trendline and horizontal support which will likely see the vicinity of 4.00% as a robust area in the meantime, hamstringing gold prices as the DXY will find support:

DXY weekly chart

All depends on data and the Fed

Meanwhile, ''we reiterate that precious metals have yet to discount the implications of a prolonged period of restrictive rates that should continue to weigh on prices,'' analysts at TD Securities argued. 

On the other hand, data will be key as central bankers, such as with the BoC today, will be reluctant to raise rates further which would be a positive environment for gold. Nevertheless, the Fed is still widely expected to raise the interest rate by 75 basis points in November and the yellow metal is sensitive to rising US interest rates, as they increase the opportunity cost of holding non-yielding bullion. Ahead of the event, US Gross Domestic Product data on Thursday, followed by US core inflation numbers on Friday could be the clincher before the event as investors might wish to front run it due to what clarity on the Fed rate-hike trajectory might come in the data. There will also be the European Central Bank meeting. it is worth noting that the ECB has failed to see the euro rally in several past meetings, fuelling a bid in the greenback. 

Gold technical analysis

The daily chart, above, shows a number of bullish confluences. We had a break in daily structure back on Oct 3 to take the gold price on the back side of the daily trendline resistance. The price moved back into Wednesday 22 Sep bullish peak formation lows in a micro daily bear trend. We have broken on the backside of the micro (secondary) daily trendline on Fri 22 Oct and we have two prior inside days that are being broken today (bullish). This could be cementing the formation of an inverse head and shoulders for a 150% measured move of this week's range so far to target last month's highs of near $1,735. A close above the $1,670 neckline could be the trigger point to start looking for the set-up on lower time frames.

The daily chart is bullish but the hourly charts are starting to paint a different story. The bulls need to commit over the next day to the trendline supports or face the pressures below as illustrated above. 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD retreats toward 1.0850 despite weak US employment data

EUR/USD retreats toward 1.0850 despite weak US employment data

EUR/USD loses its traction and declines toward 1.0850 after testing 1.0900 earlier in the session. Because Nonfarm Payrolls data for October missed the market expectation by a wide margin due to hurricanes and strikes, the US Dollar manages to hold its ground.

EUR/USD News
GBP/USD climbs above 1.2950, looks to end week little changed

GBP/USD climbs above 1.2950, looks to end week little changed

GBP/USD benefits from the improving risk mood and trades in positive territory above 1.2950 in the American session on Friday as markets ignore the weak labor market data from the US. The pair remains on track to end the week flat.

GBP/USD News
Gold clings to small gains near $2,750 after US data

Gold clings to small gains near $2,750 after US data

Gold clings to marginal recovery gains and trades slightly above $2,750. The 10-year US Treasury bond yield struggles to push higher after the dismal October jobs report and weaker-than-expected PMI data from the US, helping XAU/USD keep it footing.

Gold News
Bitcoin Weekly Forecast: Run toward fresh all-time high hinges on US presidential election results

Bitcoin Weekly Forecast: Run toward fresh all-time high hinges on US presidential election results

Bitcoin could experience a price pullback in the next few days ahead of the US presidential election, analysts say, an event that will be key to determining whether and how the crypto class will be regulated in the years to come.

Read more
Bank of Japan holds rates steady amid signs of modest GDP growth

Bank of Japan holds rates steady amid signs of modest GDP growth

Monthly industrial production results have been mixed but generally indicate a modest recovery in third-quarter GDP. Clear guidance from the Bank of Japan remains elusive, with each upcoming meeting being pivotal.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures