Gold Price Forecast: XAU/USD remains confined in a range below $1,800 mark

• Gold picks up bids to refresh intraday high following a bounce off three-week-old support line.
• Downbeat Treasury yields underpin safe-haven buying but firmer USD challenges the upside.
• US inflation, Retail Sales eyed to confirm Fed tapering chatters.
• Gold Weekly Forecast: XAU/USD snaps four-week winning streak, eyes on US CPI data

Update: Gold extended its sideways consolidative price action through the mid-European session and remained confined in a narrow trading band below the $1,800 round-figure mark. The risk-on impulse – as depicted by a generally positive tone around the equity markets – acted as a headwind for the safe-haven XAU/USD. Apart from this, a stronger US dollar – amid expectations for an imminent Fed taper announcement – further collaborated to cap the upside for the dollar-denominated commodity.

Despite the dismal US jobs report for August, investors seem convinced that the Fed would begin rolling back its massive pandemic-era stimulus sooner rather than later. The speculations were further fueled by Philadelphia Fed President Patrick Harker's comments on Monday, who joined a chorus of policymakers keen to trim $120 billion in monthly bond purchases. That said, a modest pullback in the US Treasury bond yields helped limit the downside for the non-yielding gold, at least for now.

This, along with worries about the fast-spreading Delta variant and a global economic slowdown, extended some additional support to gold. Even from a technical perspective, the recent range-bound price action witnessed over the past four trading sessions point to indecision amid traders and warrants caution before placing aggressive bets around the XAU/USD. Investors are likely to wait for a fresh catalyst from this week's important US macro releases – the latest consumer inflation figures and monthly Retail Sales data. The data will play a key role in influencing the commodity ahead of the FOMC monetary policy meeting on September 20-21.

Previous update: Gold (XAU/USD) begins the key week on a positive note, on the bids near $1,793 while flashing 0.3% intraday gains at the latest. The yellow metal snapped a four-week uptrend the previous week as Fed tapering concerns escalate. Even so, recently easy US Treasury yields seem to join technical support to trigger the corrective pullback as European traders brace for Monday’s work.

Firmer Producer Price Index (PPI) precedes hawkish comments from Philadelphia Federal Reserve Bank President Patrick Harker to keep Fed tapering concerns on the table. The policymaker recently said, during a Nikkei interview, “I am supportive of moving toward a tapering process sooner rather than later. When exactly that happens, the committee needs to decide. I would hope sometime this year we would be able to start the tapering process.”

Elsewhere, Typhoon Chanthu in China and the coronavirus woes that fail to recede join geopolitical challenges from North Korea to keep traders on the edge.

Alternatively, US stimulus, Iran and the easing of the Sino-American tussles join the vaccine optimism to cite the positive catalysts. US Democrats are up for easing their previous demands to push forward President Joe Biden’s $3.5 trillion stimulus. Biden’s six-pronged strategy and the US-China talks after multiple months of silence favor market sentiment and commodity prices. Additionally, the International Atomic Energy Agency (IAEA) Chief Rafael Grossi recently visited Tehran and returned with the good news of striking a deal with Iran to solve "the most urgent issue" between them.

Amid these plays, US Dollar Index (DXY) rises for the second consecutive day, up 0.10% intraday by the press time, while ignoring sluggish Treasury yields. Bond buyers seem to look for a buffer should the coupons jump and hence back the gold’s recent upside.

Moving on, a light calendar on Monday allows gold prices to consolidate the last week’s losses. However, the US Consumer Price Index (CPI) and the Retail Sales for August will be crucial as any further strength of the headline data will bolster tapering concerns and weigh on gold prices.

Also read: Central banks exercise the pandemic option and keep markets waiting

Technical analysis

An upward sloping trend line from August 13 defends gold buyers even as 100-SMA challenges the upside momentum, portraying a range between $1,783 and $1,804.

Also acting as an upside barrier is the 50-SMA level surrounding $1,807.

Given the firmer RSI and sustained trading beyond the short-term key support, gold buyers have an upper hand unless the quote drops below the stated trend line support near $1,783.

In a case where the gold prices drop below $1,783, 50-SMA may print a bearish cross while slipping below 100-SMA, which in turn will magnify the downside momentum towards five-week-old horizontal support near $1,760-58.

The $1,724 and the $1,700 threshold also act as extra supports before directing gold sellers toward the yearly low near $1,687.

Gold: Four-hour chart

Trend: Further recovery expected