Gold Price Forecast: XAU/USD eases below $1,770 amid higher US T-bond yields

After testing the $1,800 mark in a month on Thursday, the gold prices turned lower. Gold is posting a fall for the second straight day as a fresh trading week begins. The US benchmark 10-year Treasury yields rise above 1.60%, reducing non-yielding bullion’s opportunity cost. 

The US Dollar Index, which tracks the performance of the greenback against the basket of six major currencies trades higher above 94.10 with 0.19% gains, making gold expansive for other currencies holders. 

The US Retail Sales, which jumped 0.7% in September, beating the market estimates of a 0.2% decline, bolstered expectations for sooner-than-expected interest rate hikes from the US Federal Reserve.

In addition to that, the Bank of England (BOE) Governor Andrew Bailey also hinted that the British central bank is gearing up to raise interest rates in December or early 2022 as inflation risk mounts.

Gold is generally considered a hedge against inflation and currency volatility. A hawkish move by the major central banks would diminish gold’s appeal. \

Further, the SPDR Gold Trust, the world’s largest physically-backed gold exchange-traded fund (ETF) said its holding fell 0.3% to 980.1 tons on Friday from 982.72 tons a day earlier.

Nevertheless, the lower prices get support from the fall in global equities and concerns on the patchy global growth recovery.  

The Asian stock market and US futures dropped amid surging energy prices boosting worries about inflation and also as the Chinese growth faltered.

China’s economy stumbled in the third quarter, hurt by power shortages, supply chain bottlenecks, and major disruptions in the property market. The Gross Domestic Product (GDP) expanded 4.9% in July-September, much below the market forecast. 
 

Technical Outlook

XAG/USD daily chart

Gold prices fell nearly $40 on Friday after testing the $1,800 mark on Thursday for the first time since September, 15. The downside is being confirmed as the prices trade below the crucial 100-day and 50-day Simple Moving Averages (SMA) confluence.

The Moving Average Convergence Divergence (MACD) holds below the midline with a bearish crossover. Any downtick in the MACD indicator would amplify the selling pressure and the prices would approach Tuesday’s low of $1,750.81. A daily close below the mentioned level would entice bears to retest the $1,740 horizontal support level. XAU/USD bears could meet the September, 29 low at $1,721.

Alternatively, if the prices sustain above the intraday high, it could retrace to the $1,780 horizontal resistance level, above the 50-day SMA at $1,777.66. Next, the XAU/USD bulls would again test the 100-day SMA at $1,782.21. A daily close above the mentioned level would see the $1,820 horizontal resistance level for the bulls.

XAU/USD additional levels