Gold Price Forecast: XAU/USD sticks to gains near weekly high, just below $1,790 level

Update: Gold maintained its bid tone through the early North American session and was last seen hovering near the top end of the weekly trading range, just below the $1,790 level. The US dollar extended the previous day's post-FOMC retracement slide from the vicinity of a 16-month high and lost some additional ground on Thursday. This, in turn, was seen as a key factor that allowed the dollar-denominated commodity to capitalize on the overnight goodish rebound from the $1,753 area or a two-month low.

The USD bulls failed to gain any respite from the disappointing releases of the US Weekly Initial Jobless Claims data and Philly Fed Manufacturing Index. Apart from this, declining US Treasury bond yields turned out to be another factor that acted as a tailwind for the non-yielding yellow metal. That said, the risk-on rally across the global equity markets could hold back bulls from placing aggressive bets around traditional safe-haven assets and cap the upside for the gold prices.

Even from a technical perspective, it will be prudent to wait for a sustained strength beyond the 200/100-day SMAs confluence hurdle, around the $1,795 region before positioning for any further gains. Nevertheless, gold, so far, has managed to hold in the positive territory for the second successive day and remains at the mercy of the USD price dynamics.

Previous update: Gold built on the previous day's post-FOMC recovery move from the $1,753 area, or a two-month low and gained some follow-through traction on Thursday. This marked the second successive day of a positive move and pushed spot prices to the $1,786 region during the early European session.

As was widely expected, the US central bank kept its interest rate unchanged at 0.25% and said that it would double the pace of tapering to $30 billion per month. The so-called dot plot showed that officials expect to raise the fed funds rate at least three times next year. The markets, however, had already priced in the prospects for a faster policy tightening by the Fed. This, in turn, led to a sharp US dollar pullback from the vicinity of a 16-month high, which extended through the early part of the trading on Thursday and benefitted dollar-denominated commodities, including gold.

Apart from this, concerns about the economic fallout from the rapid spread of the new Omicron variant, along with the imposition of fresh restrictions in Europe and Asia further underpinned the safe-haven XAU/USD. That said, a generally positive tone around the equity markets could hold back traders from placing aggressive bullish bets and keep a lid on any further gains for gold. Market participants now look forward to the US economic docket, featuring the release of the Initial Weekly Jobless Claims, Philly Fed Manufacturing Index, Industrial Production and flash PMIs. This, along with some volatility infused by the BoE/ECB policy decision, should provide some impetus to the commodity.

Technical outlook

From a technical perspective, any subsequent move up is likely to confront stiff resistance near a technically significant 200-day SMA. The mentioned barrier, around the $1,795 region, coincides with 100-day SMA. A sustained strength beyond the confluence hurdle should pave the way for a further near-term appreciating move. Gold could then accelerate the momentum towards an intermediate resistance near the $1,812-15 region before eventually climbing to test the $1,832-34 supply zone.

On the flip side, any meaningful pullback now seems to find decent support near the $1,770 level. Some follow-through selling has the potential to drag the XAU/USD back towards the overnight swing low, around the $1,753 region, which if broken will be seen as a fresh trigger for bearish trades. The next relevant support is pegged near the $1,726-25 area, below which gold prices could test the $1,700 round-figure mark.

Gold daily chart

Key levels to watch