Gold Price Forecast: XAU/USD flat-lined below 100/200-DMAs confluence resistance

Gold struggled to capitalize on Friday's goodish rebound from a one-month low touched in the previous day and witnessed a subdued/range-bound price action on the first day of a new trading week. The XAU/USD remained confined in a narrow band through the early European session and was last seen trading in the neutral territory, just above the $1,780 level. Firming expectations for a faster policy tightening by the Fed turned out to be a key factor that acted as a headwind for the non-yielding yellow metal.

Investors seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflationary pressures. Even Friday's mixed US NFP report did little to alter hawkish Fed expectations. In fact, the money markets indicate a high probability that the Fed would hike interest rates by May 2022. Apart from this, the risk-on impulse in the markets led to a goodish rebound in the US Treasury bond yields. This, in turn, assisted the US dollar to regain positive traction and further undermined the dollar-denominated gold.

The global risk sentiment stabilized in the wake of reports, suggesting that Omicron patients only had relatively mild symptoms. This was evident from a generally positive tone around the equity markets, which was seen as another factor that capped the upside for the safe-haven gold. That said, the lack of any fresh selling warrants some caution for bearish traders and positioning for any meaningful intraday slide amid absent relevant market moving economic releases. Nevertheless, the fundamental backdrop supports prospects for an extension of the recent sharp corrective slide from the $1,877 area, or a five-month top touched in November.

Technical outlook

From a technical perspective, the emergence of fresh selling on every attempted recovery beyond the $1,800 mark and acceptance below the 100-day and 200-day SMAs confluence validates the negative bias. Hence, a slide back towards challenging horizontal support, around the $1,760 region, remains a distinct possibility. Some follow-through selling should pave the way for a slide towards the next relevant support around the $1,752-51 area.

On the flip side, immediate resistance is pegged near the $1,791-92 region, or the 100/200-DMAs confluence, which if cleared might trigger a short-covering move. The XAU/USD might then move back above the $1,800 level and test the $1,810-15 supply zone. The latter should act as a strong barrier for gold and a key pivotal point for short-term traders. A sustained strength beyond has the potential to lift spot prices back towards the $1,832-34 area.

Gold daily chart

Levels to watch