Gold Price Forecast: XAU/USD corrects further to test 100-DMA amid firmer yields

Update: Amid a data light docket and return of full markets on Tuesday, gold price is extending its corrective pullback from two-month highs of $1834.

The market mood remains upbeat, which dulls the demand for safe-havens such as the US Treasury bonds and gold while boosting the yields across the curve. Rallying Treasury yields re-ignite the post-NFP rebound in the US dollar vs. its main peers, adding to the weight on gold.

Gold price is currently testing the 100-Daily Moving Average (DMA) support at $1816 after it faced rejection once again above $1830. Traders now look forward to the European Central Bank (ECB) monetary policy decision for fresh direction on gold price.

Read: Gold Price Forecast: XAU/USD's post-NFP move up falters near $1,832-34 hurdle

Gold (XAU/USD) drops back to $1,823, reversing the Asian session gains ahead of cheering Tuesday’s full markets. While the cautious optimism favors gold buyers, coupled with the US dollar weakness, doubts over the major central bank actions and indecision in the markets keep gold traders at loggerheads near multi-day high flashed on Friday.

US Dollar Index (DXY) drops 0.07% intraday to 92.14 as easing coronavirus fears and vaccine hopes, as well as escalating chatters over the European Central Bank (ECB) tapering, underpin risk-on mood. Furthermore, the US traders’ return from the holiday starts the week with old tunes surrounding dismal US jobs reports and favor the positive mood.

While portraying the mood, the S&P 500 Futures print mild gains whereas the Asian stocks are also trading mostly positive by the press time.

It should be noted that Australia, New Zealand and Japan mark the reduction in the COVID-19 numbers and tease plans of how they could overcome the pandemic, especially in Canberra. Also adding to the optimism are the talks surrounding booster shots and faster covid vaccinations.

Even so, firmer US Treasury yields hint at the cautious mood ahead of the key event of the week, namely the ECB monetary policy meeting, which in turn weighs on the gold prices. That said, the US 10-year Treasury yields begin the week’s trading on a firmer not around 1.34%, up 2.2 basis points (bps).

Moving on, the return of the US and Canadian traders from an extended weekend will be eyed for fresh impulse. However, major attention will be given to the central bank chatters amid concerns that the pandemic-led lockdowns have pushed back previous tapering plans. The same should ideally help the gold prices but it all depends upon the US bond moves and the ECB.

Read: Gold Price Forecast: Bulls may finally win the battle

Technical analysis

Firmer Momentum line and upbeat RSI favor gold buyers above a monthly support line, near $1,818. Also challenging the metal sellers is the sustained trading above 200-SMA level around $1,794.

However, a clear upside break of $1,832-34 area comprising multiple highs marked since mid-July becomes necessary for gold bulls to retake the controls.

Following that, early June’s low near $1,855 may offer an intermediate halt during the rally targeting the $1,900 threshold, followed by June’s top surrounding $1,917.

It’s worth noting that a downside break of $1,794 will have an additional filter to the south in the form of a three-week-old support line near $1,786.

Gold: Four-hour chart

Trend: Bullish