Gold Price Forecast: XAU/USD bounces towards key $1,792 barrier despite firmer yields

Update: Gold is finding its feet in the European session this Tuesday, as bulls aim for a test of the critical $1,792 supply zone. The risk-off market mood-driven US dollar retreat is aiding the bounce in gold price. The further upside, however, appears elusive amid the rally in the Treasury yields and European indices. The optimism surrounding the new Omicron covid variant combined with China’s latest support measures to boost the economic growth has boded well for the risk sentiment.

Next of relevance for gold remains the US Unit Labor Cost data amid a sparse docket. Meanwhile, the covid updates and the yields price action will continue to influence gold price.

Read: Gold Price Forecast: Risks remain skewed to the downside amid ebbing Omicron fears

Gold (XAU/USD) consolidates intraday losses while bouncing off the daily low to $1,779 during Tuesday’s early European morning. Even so, the bullion struggles for a clear direction amid a lack of major data/events and cautiously optimistic markets ahead of the key US Consumer Price Index (CPI) data, up for publishing on Friday.

An absence of notable virus-led deaths and expectations of finding a cure to the COVID-19 strain seems to keep the markets positive amid a lack of major data/events, especially after China and Aussie catalysts are out. On the same line were the People’s Bank of China’s (PBOC) Reserve Ratio Requirement (RRR) actions and Japan’s readiness for record stimulus.

While portraying the mood, the US Treasury yields and the stock futures keep the week-start rebound but the US Dollar Index (DXY) struggles to pick up, down 0.05% intraday around 96.23 at the latest.

The risk-on mood favors the gold prices but the recent pick-up in the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, joins the firmer US yields to weigh on the gold prices.

However, a lack of major data/events may restrict short-term gold moves, at least ahead of Friday’s US Consumer Price Index (CPI) release. Following that, the next week’s Fed meeting will be crucial to watch.

Technical analysis

Having breached an ascending support line from late September, now resistance around $1,795, gold remains inside a two-week-old descending trend channel.

That said, the latest rebound fails to overcome the 50-SMA level of $1,785, suggesting another dip towards the channel’s support line, near $1,760. Adding strength to the $1,761 support is an upward sloping trend line from September.

It’s worth noting that gold buyers will have to cross the 200-SMA level surrounding $1,810 for conviction, even if they manage to cross the aforementioned hurdles, namely $1,785 and $1,795.

If at all the gold bulls manage to keep reins past $1,810, $1,817 and the early November’s swing high near $1,832 can test the upside moves before the tops marked during July and September close to $1,834.

Gold: Four-hour chart

Trend: Further weakness expected