Gold Price Forecast: XAU/USD attempts to score above $1,800 amid softer USD

Update: Gold prices are set to close the week on a higher note, as they remain steady near $,1800 so far this Friday. The precious metal touched the highs of $1,810.47 in Thursday's US session, following the greenback sell-off against major currencies. The US Dollar Index (DXY) slipped below 93.50 following disappoiting US Gross Domestic Product (GDP), which fell 2% in Q3 below market expectations of 2.7%. The downbeat reading bolstered speculations that the other central banks might outpace the Fed in monetary policy normalization.

In addition to that, the latest World Gold Council’s (WGC) report stated that the demand for gold has risen 47% to over 139 tonnes in July- September quarter in India, despite a drop of 7% in global demand. India, being the second largest consumer of gold after China. Gold is perceived as a strong hedge against inflation.

Gold (XAU/USD) seeks fresh clues following two-day advances, seesaws around $1,800 during early Friday. Even so, the yellow metal remains on the way to print a three-week run-up by the press time.

Bulls refreshed weekly top the previous day following the US dollar’s slump on the downbeat US Q3 GDP figures and the European Central Bank’s (ECB) failed attempt to tame the Euro.

That said, the US Dollar Index (DXY) posted the heaviest fall in 12 days on Thursday after US Q3 GDP slipped below 2.7% forecast to 2.0%, much lower than 6.7% prior. The softer GDP growth pushes the Fed to slow down on its monetary policy normalization rush. It should be observed that the ECB’s hint to start tapering the monthly bond purchases and the PEPP (Pandemic Emergency Purchase Program) will end next March propelled the Euro and weighed down the USD. The regional central bank left monetary policy unchanged, as expected, with refinancing rate at 0.0% and deposit rates at -0.5%.

Although the greenback gauge remains lackluster by the press time and supports the gold buyers, sour sentiment challenges the commodity’s upside momentum. The same could take clues from an absence of a deal on US President Joe Biden’s $1.75 trillion stimulus package. Recently, US House Speaker Nancy Pelosi conveyed her optimism towards the passage of infrastructure and social spending, climate bills during the phone call to postpone the vote on the infrastructure bill.

To portray the mood, S&P 500 Futures print mild losses while the US 10-year Treasury yields struggle for clear direction around 1.568%.

Given the risk-off mood and an absence of US dollar selling, gold may remain pressured ahead of the key US inflation figures. That said, the Core Personal Consumption Expenditures (PCE) – Price Index for September is likely to ease to 0.2% from 0.3% prior on the MoM basis. The same should add to hopes of a bit slower dial-back of easy money by the Fed, which in turn may exert additional downside pressure on the USD on meeting the forecasts and help gold prices to retail the latest bullish impulse.

Read: Personal Consumption Expenditure Price Index September Preview: Transitory inflation becomes permanent

Technical analysis

Gold (XAU/USD) remains on the front foot inside a two-week-old rising wedge formation amid firmer RSI conditions, not overbought.

Although 50-SMA adds strength to the wedge’s support line around $1,788, gold buyers have repeatedly been rejected by 78.6% Fibonacci retracement (Fibo.) of September’s fall, near $1,810.

Even if the quote manages to cross the $1,810 hurdle, the upper line of the stated wedge close to $1,814 the previous month’s peak of $1,834 will be tough nuts to crack for the gold bulls.

On the contrary, a downside break of $1,788 support confluence will confirm the bearish chart pattern and could aim for September’s bottom of $1,721. During the fall, $1,770 and $1,745 may offer multiple supports to test the gold sellers.

Overall, gold remains in the upward trajectory but the bulls have a bumpy road ahead.

Gold: Four-hour chart

Trend: Further upside expected