Gold Price Forecast: XAU/USD climbs to multi-day tops, beyond $1,755 level

Update: Gold added to the previous day's strong move up – marking the biggest one-day percentage gain since May 6 – and edged higher for the second consecutive session on Thursday. The XAU/USD held on to its modest gains through the early European session and was last seen hovering near three-day tops, just above the $1,755 level. Signs of moderating inflationary pressure in the US eased fears about an early withdrawal of the stimulus by the Fed. This was reinforced by some follow-through pullback in the US Treasury bond yields, which extended some support to the non-yielding yellow metal.

That said, the Fed officials have started to guide the market towards early tapering and higher interest rates as soon as 2022. This was seen as a key factor that helped limit the US dollar profit-taking slide and might act as a tailwind for the precious metal. A stronger USD tends to undermine demand for dollar-denominated commodities, including gold, warranting some caution for aggressive bullish traders. Nevertheless, the intraday uptick assisted the XAU/USD to move further away from the early week flash crash to the $1,688 region, back closer to YTD lows touched in March.

Market participants now look forward to the US economic docket, featuring the releases of the Producer Price Index and the usual Initial Weekly Jobless Claims for a fresh impetus. This, along with US bond yields and the broader market risk sentiment, might further contribute to producing some meaningful trading opportunities around gold.

Previou update: Gold (XAU/USD) struggles to extend the previous day’s recovery moves, the biggest run-up since early May, taking rounds to $1,750 ahead of Thursday’s European session. Gold prices seesaw in a choppy range as bulls seek fresh clues to copy the previous day’s heavy rise.

Also challenging the metal’s rise could be the latest chatters surrounding Fed tapering and rate hikes. Recently, Federal Reserve Bank of San Francisco President Mary C. Daly said, per the Financial Times, “Tapering of asset purchases could start as soon as this year.”

Kansas City Fed President Esther George teased early tapering the previous day while also citing a long way for the monetary policy adjustments. On the same line were Dallas Fed President Robert Kaplan and Richmond Fed President Thomas Barkin.

Additionally, a battle between the covid woes and the vaccine drive also confuses gold traders. While the virus infections are recently on the rise, the NBC news said that the US Food & Drug Administration (FDA) braces for the third vaccine dose for immunocompromised people.

It should be noted that the US Dollar Index (DXY) remains on the back foot after easing from the highest since April on Wednesday, down 0.02% intraday near 92.88. The greenback’s sluggish moves could be linked to the subdued S&P 500 Futures but not the US 10-year Treasury yields that stay firmer to regain 1.35% level by the press time.

Looking forward, gold traders will look for more optimism and further USD weakness to keep the recovery moves on the table. Also important will be the US Producer Price Index (PPI) data for July, market consensus backs no change in 5.6% YoY figures, as well as the weekly readings of the US Jobless Claims, likely to ease from 385K to 375K.

Technical analysis

Gold trades above 5-DMA for the first time in August, backed by RSI recovery from the oversold region, which in turn suggests further recovery towards a six-month-old horizontal hurdle surrounding $1,760.

However, any further upside may linger as MACD flashes bearish signals and hence need a strong push to the north.

Meanwhile, a downside break of $1,745, comprising the stated DMA, will find multiple supports near $1,720 and the $1,700 round figure.

In a case where gold bears remain dominant past $1,700, an ascending trend line from early March and the yearly bottom, respectively around $1,688 and $1,676, will be in focus.

Gold: Daily chart

Trend: Further recovery expected