Gold Price Forecast: XAU/USD turns south after facing resistance at $1,820

Update: Gold price is retreating from near monthly highs of $1,820, having jumped on Thursday in a typical choppy year-end trading, Gold price almost tested December highs but failed to break through it, as bulls remain cautious heading into the yearly close. The bright metal remains on track to record its worst performance in six years, as the US dollar holds the higher ground amid expectations of aggressive Fed tightening next year.

Gold price rallied hard on Thursday amid a sharp correction in the US Treasury yields across the time horizon. In the day ahead, volatile trading cannot be ruled amid slowing volumes while traders turn their attention towards next week’s US Nonfarm Payrolls data.

End of update

Gold seesaws around the weekly top, grinding at $1,815 during Friday’s Asian session, after rising the most in a day since December 22.

While a lack of major catalysts and thin end-of-year liquidity conditions challenge gold prices, the recently downside US dollar performance and mixed moves by the other risk catalysts keep traders directed towards the traditional haven.

The metal rose on Thursday even as the US Dollar Index recovered amid firmer data. The reason could be linked to the indecision over the Fed's next move and escalation of geopolitical tension, not to forget fears of the South African covid variant, namely Omicron.

That said, the US Initial Jobless Claims eased to 198K versus 208K expected during the week ended on December 24. Further, Chicago Purchasing Managers’ Index rose past 62.0 forecast to 63.1 for December.

Talking about the virus, Reuters tally for the US coronavirus numbers suggests a record number of newly reported cases, based on the seven-day average, while printing above 290,000 figures for the second consecutive day. “In Europe, where almost one million people have died of coronavirus over the past 12 months, traditional concerts and firework displays that typically draw thousands of people onto the streets were canceled in most major cities, including London, Paris, Zurich, Brussels, Warsaw and Rome,” said Reuters.

Elsewhere, the US policymakers remain hopeful of reaching an agreement over the Build Back Better (BBB) plan while also trying to placate fears over the Omicron.

It should be noted that the absence of breakthrough from recent talks between US Preside Joe Biden and his Russian counterpart Vladimir Putin joins Iran’s space launch and Sino-American tussles to weigh on the risk appetite.

Against this backdrop, the Wall Street benchmarks posted mild losses whereas the US 10-year Treasury yields consolidated the heaviest daily jump in three weeks, posted the previous day. That said, the S&P 500 Futures remain lackluster around 4,775 at the latest.

Looking forward, Friday is likely to be a dull affair for the global traders as most of them will be busy preparing for 2022, amid holidays in major Asia-Pacific markets. Adding to the trading filters is the absence of major data/events.

Technical analysis

Gold prices stay past the 200-SMA level of $1,801 after breaking fortnight-old support, now resistance near $1,820. However, the receding bearish bias of the MACD and steady RSI help the metal buyers to stay hopeful. In addition to the 200-SMA, the repeated bounce off 100-SMA, close to $1,793, also favors the gold bulls.

The same hints that the recovery gains momentum but the gold buyers await a clear upside break of $1,820, which in turn will direct the metal towards the 61.8% Fibonacci retracement (Fibo.) level of November-December downside, around $1,830.

However, the bullion's further upside will have only one hurdle, namely 78.6% Fibo. level near $1,851 before challenging the last monthly top near $1,877.

Meanwhile, a downside break of $1,792 will trigger a drop to $1,770 but a two-month-old horizontal support zone near $1,760 appears a tough nut to crack for gold bears.

Gold: Four-hour chart

Trend: Further upside expected