Gold Price Forecast: XAU/USD slips below $1,800, downside seems limited

Gold faded an early North American session bullish spike to the $1,806-07 region and dropped to fresh daily lows in the last hour, albeit lacked follow-through selling. The XAU/USD has now reversed a part of the previous day's post-US CPI positive move to one-week tops and was last seen trading just below the $1,800 round-figure mark.

The intraday downtick lacked any obvious fundamental catalyst and could be solely attributed to some technical selling near a technically significant 200-day SMA. That said, a combination of supporting factors might continue to act as a tailwind for the XAU/USD and help limit any deeper losses. Investors remain worried about the fast-spreading Delta variant of the coronavirus and a global economic slowdown. The market concerns were further fueled by disappointing Chinese macro data, which underscored recent signs of slackening economic momentum in the world's second-largest economy. This, in turn, boosted demand for traditional safe-haven assets and could lend some support to gold.

Meanwhile, signs of easing inflationary pressure in the US dampened prospects for an imminent Fed taper announcement at the upcoming FOMC meeting on September 20-21. This was reinforced by some follow-through decline in the US Treasury bond yields, which might further benefit the non-yielding yellow metal. This, to a larger extent, overshadowed an unexpected jump in the Empire State Manufacturing Index – to 34.3 in September from the 18.3 previous – and kept the US dollar bulls on the defensive. This was seen as another factor that extended some support to dollar-denominated commodities, including gold, warranting caution for aggressive bearish traders.

Technical outlook

From a technical perspective, the overnight positive move confirmed a bullish breakout through a one-week-old trading range. However, failure near the very important 200-day SMA makes it prudent to wait for some follow-through buying beyond the $1,808-10 region before positioning for any further appreciating move. The next relevant resistance is pegged near the $1,820-22 region ahead of the $1,832-34 heavy supply zone. The latter should act as a key pivotal point for short-term traders, which if cleared decisively will be seen as a fresh trigger for bullish traders.

On the flip side, any meaningful slide below the trading range breakpoint, around the $1,795 region, is likely to find decent support near the $1,784-83 horizontal zone. A convincing break below will negate the near-term positive outlook and shift the bias back in favour of bearish traders. The XAU/USD might then accelerate the slide towards the $1,750 level. The bearish trend could further get extended and drag gold towards the $1,729-28 area en-route of the $1,700 round figure.