Gold Price Forecast: XAU/USD remains on the defensive below $1,830 level

Update: Gold struggled to capitalize on the previous session's strong positive move to the highest level since mid-July and witnessed a subdued/range-bound price action on Monday. Despite disappointing headline NFP print, additional details of the latest US monthly jobs report kept alive hopes for an imminent Fed taper announcement. This was evident from a sharp intraday spike in the US Treasury bond yields on Friday, which kept a lid on any further gains for the non-yielding gold.

In fact, the yield on the benchmark 10-year US government bond jumped back above 1.32%, which, in turn, provided a much-needed respite to the US dollar bulls. A strong follow-through USD recovery from one-month tops was seen as another factor that contributed to cap the upside for the dollar-denominated commodity. Apart from this, the underlying bullish sentiment in the financial markets also acted as a headwind for traditional safe-haven assets, including gold.

The downside, however, remains cushioned amid relatively thin liquidity conditions on the back of a holiday in the US. This, in turn, warrants some caution before confirming another rejection near the $1,832-34 region and positioning for any meaningful corrective slide around gold.

Previous update: Gold (XAU/USD) begins the crucial week on a back foot, down 0.11% intraday around $1,825, heading into Monday’s European session.

An absence of the US and Canadian traders join sluggish economic calendar and the coronavirus woes to weigh on the market sentiment, underpinning the gold price weakness. It’s worth noting that the cautious mood ahead of crucial central bank meetings and important data scheduled during the week also allows gold buyers to consolidate the recent gains.

Gold’s pullback from the seven-week top could be best linked to the mildly offered stock futures and Treasury yields, favoring the US Dollar Index (DXY). That said, the DXY rises 0.08% intraday to portray a bounce-off monthly low.

COVID-19 conditions remain grim in Asia­–Pacific and join the latest China­­–Taiwan tussles to weigh on the market sentiment. Furthermore, political play in Japan and downbeat headlines from Afghanistan also portray a mild risk-off mood amid a quiet Asian session.

This week comprises three key central bank meetings, namely the ECB, RBA and BOC, which in turn keeps the traders on their toes and curtail the previously risk-on mood. Also in the line were Q2 GDP figures from Eurozone and Japan, which in turn probe gold buyers. Additionally, downbeat US employment data for August and weak ISM Services PMI raised challenges for the global economic outlook and also poke optimists.

Moving on, global markets are likely to remain inactive as American and Canadian traders enjoy an extended weekend. Hence, a pullback can’t be rejected but the odds favoring a trend change are likely minimal.

Technical analysis

Despite the failure to cross a seven-week-old horizontal hurdle, around $1,832-34, bullish MACD and upward sloping Momentum line back the recovery moves from the yearly low.

Also favoring the gold buyers is the metal’s sustained trading beyond the 200-DMA level of $1,810, as well as a clear upside break of a three-month-old descending trend line, now support around $1,795.

It’s worth noting that the $1,800 add to the downside filters whereas June’s low around $1,750 becomes the key support past $1,795.

Alternatively, a daily closing beyond $1,834 becomes necessary for the bulls to progress towards the early June’s low near $1,856. However, any further upside will enable gold buyers to aim for the $1,900 threshold and a fresh three-month high beyond $1,916.

Gold: Daily chart

Trend: Further upside expected