Gold Price Forecast: XAU/USD eyes $1,814 hurdle as Omicron weigh on yields

Update: Gold (XAU/USD) prints mild gains of around $1,810 during a sluggish Monday morning. The yellow metal cheers the US dollar weakness, as well as downbeat Treasury yields to print the latest gains around the monthly high, flashed on December 17.

That said, the US Dollar Index (DXY) drops 0.08% to 96.10 whereas the US 10-year Treasury yields dropped 1.1 basis points (bps) to 1.482%, stepping back from a two-week high flashed the previous day. On the contrary, the S&P 500 Futures rise 0.11% intraday around 4,720 by the press time.

Mixed concerns over the South African COVID-19 variant, namely Omicron, joins cautious optimism surrounding US President Joe Biden’s Build Back Better (BBB) plan favors the recent risk-on mood. Adding to the positives were downbeat China Industrial Profits and updates from the US suggesting a jump in the US retail sales data, per Mastercard report.

However, a lack of major data/events join holiday mood in New Zealand, Australia, Canada and the UK seems to restrict the market moves. It’s worth noting that the US Dallas Fed Manufacturing Index for December, expected 13.2 versus 11.8 prior, may offer intermediate moves during an anticipated sluggish session.

End of update.

Gold (XAU/USD) struggles to defend the $1,800 threshold amid a sluggish Asian session on Monday. The yellow metal witnessed a lackluster session the previous day amid an offer in multiple global markets. However, the recent escalation in the virus fears, coupled with the geopolitical headlines, challenge gold buyers of late.

While the coronavirus cases jumped in the West and recalled major activity restrictions despite the holiday season, fears of the faster spread of the COVID-19 variant linked to South Africa, dubbed as Omicron, add to the market fears and weigh on gold prices. The average number of new US coronavirus cases has risen 45% to 179,000 per day over the past week, per Reuters tally whereas the UK and France reported a fresh high of Covid-19 daily infections, respectively crossing 122,000 and 94,000 daily cases at the latest.

The jump in the covid cases also brings the travel restrictions and limited activity during an otherwise heavy-spending time of the year. “Commercial airlines around the world canceled more than 4,500 flights over the Christmas weekend, as a mounting wave of COVID-19 infections driven by the Omicron variant created greater uncertainty and misery for holiday travelers,” mentioned Reuters.

On a different page, Russia-Ukraine tussles couldn’t benefit from Moscow’s withdrawal of 10,000 tops from drill near Kyiv, term as Christmas de-escalation by The Guardian. While US Vice President Kamala Harris said on the CBS interview that the US and Russia are in talks about Ukraine, German officials will hold a meeting with their Russian counterpart for the same on Monday.

It’s worth noting that studies showing lesser hospitalization due to Omicron and upbeat spending in the US keep the gold buyers hopeful. A report from Mastercard, shared by Reuters, shows that the US retail sales rose 8.5% during this year's holiday shopping season from Nov. 1 to Dec. 24.

Also positive for gold was US Vice President Harris’ optimism over getting President Joe Biden’s Build Back Better (BBB) plan despite the latest challenges raised by Senator Joe Manchin. Goldman Sachs raised doubt on the issue while saying, “While Congress is likely to approve some new spending on manufacturing and supply chain-related incentives, we no longer expect the Senate to pass the Build Back Better bill and the near-term spending it includes on the extension of the expanded child tax credit"

Amid these plays, the US 10-year Treasury yields remain pressured around 1.48% whereas S&P 500 Futures rise 0.20% intraday gains at the latest.

Moving on, a light calendar in the US, with only Dallas Fed Manufacturing Index for December, expected 13.2 versus 11.8 prior, could restrict short-term gold price moves.

Technical analysis

A clear run-up beyond 200-DMA keeps gold buyers hopeful to overcome a two-month-old horizontal hurdle surrounding $1,814-16 despite the holiday mood.

Following that, double-tops marked during July and September around $1,834 should return to the chart before the $1,850 threshold could challenge the bulls eyeing to cross November’s peak of $1,877.

Meanwhile, an ascending support line from August, around $1,778, adds to the downside filters below the 200-DMA level of $1,797.

In a case where gold bears remain dominant past $1,778, the $1,758 level may offer an intermediate halt before dragging the quote towards September’s low of $1,721 and the $1,700 round figure.

To sum up, gold prices grind higher but have a bumpy road to the north.

Gold: Daily chart

Trend: Further upside expected