Gold Price Forecast: XAU/USD eyes $1,780 amid recent USD weakness

Update: Gold prices lock in some fresh gains above $1,770 amid a recent pullback in the greenback. The US benchmark Treasury yields trade lower at 1.57% with 0.57% losses, which weigh on the greenback.  A lower USD valuation enhances the appeal of the precious metal for the other currencies holders. Gold prices score more than 0.50% on Tuesday amid concerns about the patchy global growth recovery. The weak US Factory Output and China’s slower growth in Q3 added to the optimism surrounding the precious metal.

In addition to that, the Reserve Bank of Australia’s (RBA) latest monetary policy minutes highlighted the risk of the Delta COVID-19 variant on the country’s economic recovery. Furthermore, India, the world’s second-largest gold consumer, recorded a jump of 252% in its gold's import to $24 billion in the April-September period as the festive demand picking up amid easing coronavirus restrictions.    

Gold edged higher during the Asian session on Tuesday and moved back above the $1,770 level in the last hour. The XAU/USD, for now, seems to have snapped two days of the losing streak and was supported by a combination of factors. The uptick was sponsored by the emergence of fresh selling around the US dollar, which tends to benefit dollar-denominated commodities, including gold. Following the previous day's good two-way price moves, the USD met with some fresh supply amid a modest pullback in the US Treasury bond yields. This, in turn, was seen as a key factor that acted as a tailwind for the dollar-denominated commodity.

Apart from this, a generally softer tone around the equity markets extended additional support to the safe-haven precious metal. Worries that the recent widespread rally in commodity prices will stoke inflation and derail the global economic recovery continued weighing on investors' sentiment. The market concerns were further fueled by Monday's disappointing Chinese macro data, showing that the economic growth decelerated sharply from 7.9% to 4.9% during the third quarter. That said, hawkish signals by major central banks might hold traders from placing aggressive bullish bets around the non-yielding gold and cap gains.

Market participants seem convinced that the Fed will begin rolling back its massive pandemic-era stimulus by the end of this year. Investors have also started pricing in the possibility of an interest rate hike in 2022 amid fears about a faster than expected rise in inflation. Adding to this, the Bank of England Governor Andrew Bailey sent a fresh signal that the British central bank is gearing up to raise interest rates to counter growing inflation risks. Growing market acceptance about the prospects for a policy tightening by the Fed/BoE warrants some caution before positioning for any further appreciating move for gold.

There isn't any major market-moving economic data due for release on Tuesday, leaving gold at the mercy of the broader market risk sentiment and bond yields. That said, scheduled speeches by BoE MPC Member Catherine Mann and Governor Andrew Bailey might provide some impetus to gold. Later during the US session, comments by Fed Governor Michelle Bowman will influence the USD price dynamics and produce some meaningful trading opportunities around gold.

Technical outlook

From a technical perspective, last week's sharp rejection slide from the 100/200-day SMA confluence near the $1,800 mark stalled near the $1,760 static support. This makes it prudent to wait for some follow-through selling before confirming that the recent move up has run out of steam and placing fresh bearish bets. The next relevant support is pegged near the $1,750 region, below which gold prices could accelerate the fall towards September monthly swing lows, around the $1,722-21 zone.

On the flip side, immediate resistance is pegged near the $1,780-82 region, which if cleared decisively should allow bulls to make a fresh attempt to conquer the $1,800 mark. Some follow-through buying has the potential to lift the XAU/USD back towards the $1,832-34 heavy supply zone. The $1,810 area, followed by the $1,818 region could act as an intermediate hurdle on the way up.

Gold daily chart