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Gold Price Forecast: XAU/USD failure at $1,800 put bears in control

  • Gold breaks beneath $1,800, bears target $1,700.
  • US 10-year Treasury yields rise, underpinning demand for the US dollar.
  • Fed speakers in the week agree on prospects of bond tapering this year.

Gold edges lower during the New York session, trading at $1,789.08 down 0.30% at the time of writing. Meanwhile, the US 10-year Treasury yields, which nosedived on Thursday on a dismal US 30-year bond auction, recovered four basis points (bps) up to 1.341%, lifting the greenback. The US dollar index, which tracks the performance of the buck against six currencies and influences the price of commodities, is up 0.05% at 92.57.

Earlier in the American session, the US dollar index was trading around 92.36. However, rising yields and mixed market sentiment underpinned demand for the greenback, triggering the fall in the non-yielding metal.

Fed speakers throughout the week have referred to the start of the bond tapering assets. On Tuesday, St. Louis Fed James Bullard and New York’s Fed John Williams agreed that the reduction of the QE will begin later in this year. Although markets are familiar with the hawkish stance of James Bullard, NY Fed’s John Williams surprised a bit, thus hinting that Jerome Powell is inclining towards the same posture.

On Thursday, Atlanta’s Fed Raphael Bostic commented that it will be appropriate to reduce the bond purchasing program sometime this year adding that he sees the economy in a reasonably strong position.

Finishing the Fed officials parade in the week was Cleveland Fed’s, Loretta Mester. On Friday Mester said that she sees upside risks to the inflation forecasts and that she would be comfortable winding down the stimulus in the first half of 2022.

XAU/USD Price Forecast: Technical outlook

Daily chart.

Gold is trading beneath its main daily moving averages, suggesting that the yellow-metal is in a downtrend. The failure of XAU/USD to reclaim $1,800 can open the path for further losses. The first demand area would be the August 19 low at $1,774.21. Once the latter is cleared, the next support down is the August 10 low at $1,717.79. A decisive break there could push the price to test the 2021 low at $1,676.86.

On the other hand, if XAU/USD reclaims $1,800, gold bulls could take a breather. The non-yielding metal would then have to wait for a fresh catalyst that could give it direction.

4-hour chart.

In this time frame, gold’s price action hashad broken the 200-simple moving average (SMA) to the downside, maintaining the bearish bias. A break below the September 8 swing lows around $1,782.47 could expose the August 19 low at $1,774.21. In case of a breach of this level, the following key demand areas would be August 12 swing lows, around $1,742, followed by the August 10 low at $1,717.79.

On the flip side, if the XAU/USD bulls reclaim the 200-SMA, their next target will be the 100 and the 50-SMA’s, lying at $1802.36 and $1,809, respectively.
 

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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