Gold Price Forecast: XAU/USD under pressure below critical $1,760

Update: Gold has been mixed at the start of the week, recently enjoying some hidden bullish divergence on the hourly time frame which has given the yellow metal some support in the US session. As we enter the final hour on Wall Street, the precious metal is trading flat at $1,751 and has travelled between a low of $1,744.88 and $1,760.91 on the day so far. 

Nevertheless, the pressure is on for the bulls with the price technically bearish below the 4-hour 200, 50 and 20 EMAs that are aligned bearishly with RSI below 50. If the price fails to overcome $1,760 on a closing basis in the coming sessions, this could give rise to further supply and a downside extension towards $1,730. The fundamental risks ahead stem from hawkish rhetoric from Federal Reserve speakers. In this regard, this could be led by Fed Chair Jerome Powell, who will join Treasury Secretary Janet Yellen in speaking before Congress on Tuesday.

For a comprehensive analysis of the gold price, see more here:

• Gold, Chart of the Week: XAU/USD bearish bias forecast below $1,760

End of update

Gold gained some positive traction on the first day of a new trading week, albeit lacked any follow-through and met with some fresh supply near the $1,760 region. The intraday pullback was sponsored by a combination of factors and dragged the XAU/USD to fresh daily lows, around the $1,744 area during the early North American session. A generally positive tone around the equity markets turned out to be a key factor that capped the upside for the safe-haven precious metal. Apart from this, a modest US dollar strength further weighed on the dollar-denominated gold.

The USD continued drawing some support from prospects for an early interest rate hike by the Fed and got an additional boost from a fresh leg up in the US Treasury bond yields. It is worth recalling that the so-called dot plot indicated policymakers' inclination to raise interest rates in 2022. The repricing of the likely timing of the Fed's policy tightening pushed the yield on the benchmark 10-year US government bond to the 1.50% threshold for the first time since June. This was seen as another factor that acted as a headwind for the non-yielding gold.

On the economic data front, the US Durable Goods Orders increased 1.8% in August and surpassed expectations for a 0.7% rise by a big margin. Adding to this, the previous month's reading was also revised higher to show a 0.5% growth as against a modest decline reported earlier. Additional details revealed that orders excluding transportation rose 0.2% vs. 0.5% expected. This, however, was offset by stronger non-defence capital goods orders excluding aircraft – a closely watched proxy for business spending plans.

That said, persistent worries about potential risks from the debt crisis at China Evergrande Group helped limit deeper losses for the XAU/USD, at least for the time being. Nevertheless, gold prices remain well within the striking distance of the lowest level since August 11, around the $1,738 region touched last Thursday and remains vulnerable to slide further. However, it will be prudent to wait for a strong follow-through selling before positioning for an extension of the recent downward trajectory from the 1,832-34 heavy supply zone.

Technical outlook

From current levels, a subsequent slide below monthly swing lows is likely to find some support near the $1,730-28 horizontal zone. The next relevant support is pegged near the $1,700 round-figure mark, which if broken decisively will set the stage for a further near-term depreciating move for gold.

On the flip side, momentum beyond the daily swing highs might confront stiff resistance near the $1,775-76 area ahead of the $1,780 horizontal support breakpoint. A sustained strength beyond has the potential to lift the XAU/USD further and allow bulls to aim back to reclaim the $1,800 mark.

Levels to watch