Gold Price Forecast: XAU/USD extends its struggle above $1800 amid risk recovery

Update: Gold price is struggling to hold ground above $1800 once again, as the US Treasury yields extend the rebound amid a recovery in the risk sentiment. Gold’s sluggish performance can be also attributed to the yields-driven lift in the demand for the US dollar while traders look past the growing concerns over the Delta covid strain spreading into Europe and the US. Gold also remains defiant to news of increased India’s gold imports, as the risk sentiment remains the main market driver. Focus now shifts towards the G-20 finance ministers and central bank governors meeting in Venice, as they look to discuss tax and the economic recovery. Data-light US docket leaves the focus on the Fed Monetary Policy report and the sentiment on Wall Street for fresh cues on gold price.

Read: Delta Doom is set to storm America, the dollar could emerge as top dog

Gold (XAU/USD) remains volatile in a range above $1,800, around $1,802 heading into Friday’s European session. The commodity prices rose to the highest since June 17 the previous day before closing almost unchanged and portray a bearish candlestick pattern to probe the six-day recovery from June’s lows.

Behind the competing moves are gold’s safe-haven nature and the US Treasury yields’ rebound, which in turn put a bid under the US dollar index (DXY).

To state the fact, the coronavirus (COVID-19) woes are back to haunt the market sentiment and challenge the economic recovery hopes. The challenges are grim because the virus variants do spread faster and resist vaccines.

While the figures from the US haven’t been so grim, the UK covid infections jump to January levels and so do pandemic numbers from South Korea, Indonesia and Thailand. Further, Australia’s New South Wales (NSW) becomes another member, unfortunately, to bear the burden of the virus woes and signal one more week of activity restrictions.

Read: Coronavirus Update: South Korea marks record infections, NSW hints another week-long lockdown

Identifying the fears of the covid, San Francisco Fed President Mary C. Daly recently said, per Financial Times (FT), that the Delta coronavirus variant and low vaccination rates in some parts of the world pose a threat to the global recovery as she urged caution in removing monetary support for the US economy.

Elsewhere, the escalation in the US-China tussles, following the signals of more Chinese companies’ trimming from the US bourses, per Reuters, also weighs on the market sentiment. Furthermore, sluggish inflation numbers from China and the recent uptick in US Jobless Claims back the risk-off mood, which in turn contributes to the gold moves.

Amid these plays, S&P 500 Futures print mild losses by the press time, tracking Wall Street’s losses, whereas the US Treasury yields recover from February lows, marked the previous day. Further, the US dollar index (DXY) also reverses the previous day’s pullback from early April tops.

Given the mixed sentiment amid the broad risk aversion wave, gold traders may wait for clarity of moves and concentrate on further covid updates in the meantime. It should be noted that the global policymakers’ acceptance of the covid woes may indirectly favor the need for easy money and trigger a pullback of the US dollar, which in turn will add strength to the gold upside.

Technical analysis: Bearish seeking entries

Despite refreshing three-week high, gold prices fail to cross a confluence of 50-day and 100-day EMA on Thursday, posting a bearish candlestick on the daily chart.

The resulted downside risk, however, needs confirmation as the quote stays inside the $1,813 to $1,794 crucial area including the stated EMA confluence and a horizontal line from June 23.

Hence, a daily closing below $1,794 could bolster the bearish moves towards $1,760 before targeting the late June low near $1,750.

On the contrary, an upside break of $1,813 won’t hesitate to challenge the early May swing highs near $1,845. Though, June 04 lows near $1,855 can test the gold buyers afterward.

Gold: Daily chart

Trend: Further weakness expected