Gold Price Forecast: XAU/USD advances toward $1,790 amid softer USD

Update: Gold prices remain on the path for weekly gains on Friday, following the previous four sessions' upside momentum. The selling pressure in the US dollar keeps the precious metal on the gaining spree. The greenback trades below 94.00 since the beginning of the week despite higher US Treasury yields. Lower USD valuations make gold attractive to the other currencies holders.

Investors remain skeptical about the US rate hike bets. New York  Federal Reserve (Fed) President John Williams said long-run inflation expectations are in line with the central bank’s 2% goal. Few other Fed members played down rate hike prospects but remained affirmative on reducing the bond-buying measures.

The improved risk sentiment, following China’s Evergrande payment news, kept the gains limited in the bullion. Evergrande made a payment of $83.5 million in lieu of the bond interest on Thursday.

Gold (XAU/USD) refreshes intraday high to $1,787 during the four-day run-up amid early Friday. The yellow metal witnessed pullback the previous day amid firmer US dollar, on relation fears, but the latest sentiment-positive headlines seem to have favored the gold buyers.

Among the positive headlines were US President Joe Biden’s optimism for the infrastructure deal during the CNN town hall event and Evergrande news. Also favoring the risk appetite could be the vaccine news.

“President Joe Biden said on Thursday he was close to striking a deal to pass major infrastructure and social spending measures, after weeks of intraparty bickering among his fellow Democrats,” per Reuters.

On the other hand, the South China Morning Post (SCMP) tried to soothe the Evergrande-led jitters while citing the company filing with the Hong Kong stock exchange. “China Evergrande rival Hopson Development Holdings Limited, which had sought to buy half of the embattled developer’s property management unit, still considers the purchase agreement ‘legally binding’ despite Evergrande rescinding the sale on October 12,” said SCMP.

Additionally, China’s Securities Times came out with the news suggesting Evergrande paid an $83.5 million bond interest payment.

It should be noted that Federal Reserve Governor Christopher Waller said that the next few months will be critical to see whether inflation is transitory, as reported by Reuters. Before that, Federal Reserve Governor Randal Quarles and Cleveland Fed President Loretta Mester highlighted inflation fears. Even so, mixed US data questioned pessimists but also didn’t allow the equity bulls to dominate further.

Against this backdrop, the S&P 500 Futures pare early Asian losses, down 0.07% at the latest, whereas the US 10-year Treasury yields remain firmer around 1.70%, recently up 1.9 basis points (bps) near 1.694%. Further, the US Dollar Index (DXY) keeps the previous day’s rebound near 93.75 by the press time.

Moving on, risk catalysts may entertain the gold traders ahead of the preliminary reading of October Markit Manufacturing PMI, expected 60.3 versus 60.7 prior. Given the fears of inflation, any further strength in the key data and/or details can propel the US dollar and weigh on the gold prices near the short-term key hurdle.

Technical analysis

Gold buyers battle inside a monthly rising wedge bearish chart pattern amid mixed signals from the MACD histogram and RSI line. Though, the 200-SMA and support line of the stated chart formation offers a tough nut to crack for the sellers around $1,769.

On the contrary, recovery moves need to post a clear run-up through the monthly horizontal resistance surrounding $1,790 to call back the gold buyers.

Following that, the monthly peak of $1,800 and the upper line of the wedge, close to $1,806, will precede the mid-September high of $1,808 to entertain the gold bulls. However, any further upside will need validation from the key $1,834 hurdle that stopped advances in July and September.

It’s worth noting that a downside break of $1,769 will theoretically trigger the south-run targeting the sub-$1,700 area. During the fall, multiple supports around $1,747 and $1,732 can test the gold sellers.

Overall, gold prices fade upside momentum but the bears need clear signals for entry.

Gold: Four-hour chart

Trend: Pullback expected