Gold Price Forecast: XAU/USD gathers strength for the next leg lower towards $1800

Gold is edging lower but holding above $1,800. In the opinion of FXStreet’s Dhwani Mehta, a corrective decline is likely to resume amid risk-off mood and a bear pennant.

The technical setup on the 4H chart remains in favor of gold bears

“Escalating tensions over the Delta covid strain on both sides of the Atlantic and Asia-pac region continue to keep the investors on the edge lifting the safe-haven appeal of gold and the dollar. If the risk-off mood worsens in the day ahead, the greenback is likely to gain further ground across its major rivals, limiting gold’s upside attempts.” 

“The downbeat mood-led Treasury yields sell-off could likely cushion the downside in gold price. In absence of relevant first-tier macro news from the US, the risk sentiment will continue to lead the way.”

“Gold is defending the 50-Simple Moving Average (SMA) at $1812 for now but remains at a risk of additional downside. The recent price action has taken the shape of a bear pennant on the said time frame, signalling caution for the optimists. A sustained break below the 50-SMA, which also coincides with the bear pennant support, will open floors towards the $1800 level.”

“A four-hourly candlestick closing above the falling trendline resistance at $1817 will invalidate the bearish continuation pattern. The downward-pointing 200-SMA at $1819 could challenge the recovery momentum.”