Gold Price Forecast: XAU/USD recovers early lost ground, flat-lined below $1,760 level

  • Gold managed to attract some dip-buying on Wednesday amid the risk-off impulse.
  • A stronger USD capped any meaningful upside for the dollar-denominated commodity.
  • Investors also seemed reluctant to place aggressive bets ahead of Friday’s NFP report.
  • Gold Price Forecast: Why XAU/USD looks vulnerable below $1750?

Gold reversed an intraday dip to multi-day lows and moved back closer to the top end of its daily trading range, around the $1,758 region during the early North American session. Worries that the recent surge in crude oil/energy prices will stoke inflation and derail the global economic recovery weighed on investors' sentiment. Apart from this, fragile US-China trade ties, China Evergrande’s debt crisis and a stalemate over the US debt ceiling triggered a fresh wave of the global risk-aversion trade on Wednesday. This was evident from a sharp corrective slide in the equity markets, which, in turn, was seen as a key factor that extended some support to the safe-haven XAU/USD.

That said, a strong US dollar rally back closer to one year tops acted as a headwind for dollar-denominated commodities, including gold. The greenback continued drawing support from expectations that the Fed would begin rolling back its massive pandemic-era stimulus as soon as November. The markets might have also started pricing in the possibility of a rate hike in 2022 amid fears of a faster than expected rise in inflation. The speculations for an early tightening by the Fed were cemented by the upbeat ADP report, which showed that private-sector employers in the US added 568K jobs in September. This was well above 428K anticipated and the previous month's downwardly revised reading of 340K.

Meanwhile, the global flight to safety led to a modest pullback in the US Treasury bond yields and kept a lid any further gains for the USD, though did little to boost the non-yielding gold. Investors also seemed reluctant to place any aggressive bets, rather would prefer to wait on the sidelines heading into this week's release of the closely-watched US jobs data. The popularly known NFP report will be published on Friday and play a key role in determining the next leg of a directional move for the XAU/USD. In the meantime, the precious metal seems more likely to continue with its two-way price moves, within a narrow trading band held over the past four trading sessions.

Technical levels to watch

From a technical perspective, the recent range-bound price action makes it prudent to wait for a convincing break in either direction before placing aggressive bets. Hence, any subsequent recovery move might confront some resistance near the $1,770 region, or one-and-half-week tops touched on Monday. The next relevant hurdle is pegged near the $1,774-75 region ahead of the $1,783-84 area, above which bulls are likely to aim back to reclaim the $1,800 round-figure mark. The latter coincides with the very important 200-day SMA and should act as a key pivotal point for short-term traders.

On the flip side, the $1,750-48 region, or the lower boundary of the weekly trading range, now seems to have emerged as immediate strong support. A convincing break below will set the stage for a slide towards the $1,729 intermediate support en-route September monthly swing lows, around the $1,722-21 region. Some follow-through selling would turn gold vulnerable to accelerate the downward trajectory towards challenging the $1,700 round-figure mark before eventually dropping to multi-month lows, around the $1,687-86 region touched on August 9.

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