Gold Price Forecast: XAU/USD bulls eyeing a move beyond 200-DMA, around $1,825 region

• COVID-19 jitters assisted gold to gains traction for the second straight session on Tuesday.
• A goodish rebound in the equity markets/US bond yields might cap gains for the commodity.
• Gold Price Forecast: US stimulus optimism, Delta fears to boost XAU/USD’s recovery

Update: Gold added to its modest intraday gains and climbed to fresh daily tops, around the $1,825 region heading into the North American session. Investors remain worried about the potential economic fallout from the spread of the highly contagious Delta variant of the coronavirus. This continued benefitting the safe-haven precious metal and helped offset a goodish rebound in the equity markets.

Meanwhile, doubts about the growth outlook, along with diminishing odds for an imminent Fed action in the near future, led to an extension of the overnight steep decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond fell below the 1.16% threshold for the first time since February 2021 and provided an additional boost to the non-yielding gold.

That said, a sudden pick up in the US dollar demand might act as a headwind for dollar-denominated commodities and cap gains for gold. Even from a technical perspective, bulls are likely to wait for a sustained strength beyond the very important 200-day SMA before positioning for a move to retest monthly swing highs, around the $1,834 area touched last Thursday. The momentum could further get extended to the $1,845-46 region, en-route the next major hurdle near the $$1,866 zone.

Previous update: Gold built on the previous day's bounce from the $1,795 region, or one-week lows and edged higher for the second consecutive session on Tuesday. The XAU/USD held on to its gains through the early European session and was last seen hovering around the $1,815 area, up nearly 0.15% for the day. Worries about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus was seen as a key factor that extended some support to the safe-haven gold. That said, a combination of factors kept a lid on any meaningful upside for the commodity, at least for the time being.

The US dollar stood tall near the highest level since February and acted as a headwind for dollar-denominated commodities, including gold. Apart from this, a generally positive tone in the equity markets, along with a solid rebound in the US Treasury held bulls from placing any aggressive bets around the non-yielding yellow metal. The downside, however, remains cushioned amid diminishing odds for an imminent Fed action in the near future. In fact, the Fed funds futures showed that the chances of a 25bps hike by the US central bank in December 2022 fell to 58% on Monday from 90% on July 13.

In the absence of any major market-moving economic releases from the US, gold remains at the mercy of the broader market risk sentiment and developments surrounding the coronavirus saga. Traders will further take cues from the US bond yields, which might influence the greenback and produce some short-term trading opportunities around the XAU/USD.

Technical outlook

Gold last week faced rejection near the very important 200-day SMA. The mentioned barrier is currently pegged near the $1,825 region, which should now act as a key pivotal point for short-term traders and help determine the next leg of a directional move. A sustained strength beyond will set the stage for an extension of the recent strong bounce from the $1,750 zone and push the XAU/USD beyond monthly swing highs, around the $1,834 region touched last Thursday. The momentum could further get extended to the $1,845-46 region, en-route the next major hurdle near the $$1,866 area. Some follow-through buying should pave the way for additional gains, allowing bulls to surpass the $1,880 level and aim to reclaim the $1,900 round figure.

On the flip side, dips below the $1,800 mark might continue to attract some dip-buying near the $1,795-90 region. A sustained breakthrough might be seen as a fresh trigger for bearish traders and prompt some aggressive technical selling. The XAU/USD might then fall to the $1,775 support area, which if broken decisively will shift the near-term bias back in favour of bearish traders. The next relevant support is pegged near the $1,762-60 area before gold eventually dropping to retest June monthly swing lows, around the $1,750 region.