Gold Price Forecast: XAU/USD clings to gains above $1,655 level amid weaker USD

Gold regains positive traction on Monday and is supported by the emergence of fresh USD selling.
Retreating US bond yields weigh on the buck, though Fed rate hike bets should limit the downside.
The risk-on impulse should further contribute to capping any meaningful gains for the commodity.

Haresh Menghani FXStreet

Gold attracts some buying on the first day of a new week and reverses a major part of Friday's downfall to over a two-week low. The XAU/USD sticks to its intraday gains through the first half of the European session and is currently placed near the daily high, around the $1,657-$1,658 region.

The US dollar struggles to capitalize on Friday's strong intraday positive move and meets with a fresh supply on Monday amid a modest pullback in the US Treasury bond yields. A weaker greenback offers some support to the dollar-denominated gold, though a combination of factors could act as a headwind and warrants caution for bullish traders.

Reports that the UK government is preparing for a major U-turn on planned tax cuts boost investors' confidence, which is evident from the risk-on impulse in the equity markets. This, along with growing acceptance that the Fed will stick to its aggressive policy tightening path to curb inflation, should keep a lid on the safe-haven gold.

In fact, the markets have priced in a nearly 100% chance for another supersized 75 bps Fed rate hike move for the fourth consecutive meeting in November. The bets were reaffirmed by the stronger US CPI report released last week and the recent hawkish comments by several Fed officials, adding credence to the negative outlook for the XAU/USD.

The aforementioned fundamental backdrop suggests that the path of least resistance for gold is to the downside. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. A sustained strength beyond the $1,680-$1,682 supply zone is needed to negate the near-term bearish bias.

Market participants now look forward to the US economic docket, featuring the release of the Empire State Manufacturing Index later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader risk sentiment might provide some impetus to gold.

Technical levels to watch

XAU/USD

Overview
Today last price	1655.8
Today Daily Change	10.72
Today Daily Change %	0.65
Today daily open	1645.08

Trends
Daily SMA20	1671.65
Daily SMA50	1711.2
Daily SMA100	1750.09
Daily SMA200	1818.49

Levels
Previous Daily High	1671.81
Previous Daily Low	1640.23
Previous Weekly High	1699.96
Previous Weekly Low	1640.23
Previous Monthly High	1735.17
Previous Monthly Low	1614.85
Daily Fibonacci 38.2%	1652.29
Daily Fibonacci 61.8%	1659.75
Daily Pivot Point S1	1632.94
Daily Pivot Point S2	1620.79
Daily Pivot Point S3	1601.36
Daily Pivot Point R1	1664.52
Daily Pivot Point R2	1683.95
Daily Pivot Point R3	1696.1

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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