Gold Price Forecast: XAU/USD regains traction, eyes $1,800

Update: After starting the new week on the back foot and edging lower toward $1,770, the XAU/USD pair regained its traction during the American trading hours on Monday and was last seen rising 0.4% at $1,786. In the absence of high-tier data releases, the sharp drop witnessed in the US Treasury bond yields seems to be making it difficult for the greenback to outperform its safe-haven rivals in the risk-averse market environment. Currently, the benchmark 10-year US T-bond yield is down 4% on the day. Meanwhile, the data published by the Federal Reserve Bank of New York revealed that the Empire State Manufacturing Index declined to 18.3 in August from 43, missing the market expectation of 29 by a wide margin.

The XAU/USD pair staged an impressive rebound in the second half of the previous week and managed to close in the positive territory. The risk-averse market environment on Monday, however, made it difficult for the pair to preserve its bullish momentum. As of writing, gold was down 0.45% on a daily basis at $1,771.

The disappointing consumer confidence data from the US triggered a USD selloff on Friday and XAU/USD rose more than 1.5%. Additionally, a 5.8% decline was witnessed in the benchmark 10-year US Treasury bond yield put additional weight on the greenback's shoulders. On Monday, the 10-year US T-bond yield is staying flat on the day at 1.2830, helping the USD stay resilient against its rivals. 

In the meantime, the weaker-than-expected Retail Sales and Industrial Production data from China seem to be hurting market sentiment at the start of the week. Reflecting the risk-averse atmosphere, S&P Futures and Nasdaq Futures both lose 0.3% ahead of Wall Street's opening bell.

Later in the day, the Federal Reserve Bank of New York's Empire State Manufacturing Index, which is expected to decline to 29 from 43, for August will be the only data featured in the US economic docket. Nevertheless, investors are likely to stay focused on the risk perception for the remainder of the day. The FOMC Minutes on Wednesday will be the next significant market driver.

Previewing this publication, "the FOMC minutes is likely to determine gold’s next near-term direction, where a hawkish report may send gold tumbling once more," noted OCBC analysts. "From now till the report, we expect the upward momentum in gold to carry it towards the $1800 resistance."

Gold Price Forecast: XAU/USD to face tough resistance at $1800 – OCBC.

Gold technical outlook

Despite Friday's decisive upsurge, the Relative Strength Index (RSI) indicator on the daily chart seems to have started to edge lower before breaking above 50, suggesting that buyers are struggling to remain in control. On the upside, the initial resistance is located at $1,790 (20-day SMA) ahead of $1,800 (psychological level, 50-day SMA) and $1,805 (100-day SMA and 20-week SMA).

On the other hand, the downward correction could extend to $1,760 (static level). A daily close below that level could open the door for additional losses toward $1,750 (static level, June 29 low) and $1,740 (100-week SMA).

Additional levels to watch for