Gold Price Forecast: XAU/USD flirts with $1,800 amid stronger USD, risk-on mood

Update: Gold witnessed some selling during the first half of the trading action on Tuesday and eroded a part of the previous day's gains back closer to multi-week tops. The XAU/USD maintained its offered tone through the early European session and was last seen flirting with daily lows, around the $1,800 mark. The US dollar gained some follow-through traction for the second successive day and moved further away from one-month lows touched on Monday. This, in turn, was seen as a key factor that acted as a headwind for dollar-denominated commodities, including gold.

Apart from this, the prospects for an early policy tightening by major central banks further contributed to driving flows away from the non-yielding yellow metal. The dominant risk-on mood turned out to be another factor that acted as a headwind for the safe-haven gold. That said, worries about the imposition of economically damaging lockdowns in China might hold traders from placing aggressive bets and help limit deeper losses for the precious metal.

Even from a technical perspective, the overnight sustained close above the 100/200-day SMAs confluence favours bullish traders and supports prospects for the emergence of some dip-buying at lower levels. Hence, it will be prudent to wait for a strong follow-through selling before positioning for any further depreciating move. Market participants now look forward to the US economic docket – featuring the releases of the Conference Board’s Confidence Index, Richmond Manufacturing Index and New Home Sales. This, along with the US bond yields, the USD price dynamics and the broader market risk sentiment, might provide some impetus to gold prices.

Previous update: Gold prices surrender the previous session's gains and struggle to defend the $1,800 mark. The US 10-year Treasury yields remain elevated near 1.63% ahead of the upcoming major central bank meetings this week. The precious metal rose almost 1% in the US session after reaching a high of $1,1810.06.

The US dollar trades near 93.90, recovering from a near one-month low in the previous session. A higher USD valuation makes gold more expensive for the buyers holding other currencies.

Investors are gearing up for the Bank of Japan (BoJ) and the European Central Bank (ECB) monetary policy decisions on Thursday, although neither of the central banks is likely to announce any change in the policy. Still, the forward guidance on growth and inflation will be a key to set the market tone. The Bank of England (BoE) member Silvana Tenreyro sounded less optimistic on interest rate hikes in her speech delivered on Monday, in the light of her comments on the job market.

Gold (XAU/USD) consolidates recent gains around $1,805, refreshing intraday low during early Tuesday following a five-day uptrend. Although risk-on mood underpinned the yellow metal to stay firmer of late, the US dollar rebound challenges the buyers ahead of important data/events of the week.

Having recovered from a fresh monthly low, the US Dollar Index (DXY) keeps the previous day’s advances, up 0.06% on a day near 93.90 by the press time. The hawkish Fedspeak and a blackout period preceding the advance estimation of US Q3 GDP probe the optimists and direct the cautious traders toward the greenback.

Also recently contributing to the DXY strength, weighing on the gold prices, were the recently positive US Treasury yields. That said, the US 10-year Treasury yields snap two-day downturn near 1.64% at the latest.

Market sentiment stayed firmer the previous day as comments from US President Joe Biden and House Speaker Nancy Pelosi propelled stimulus hopes, joining positive headlines from China’s Evergrande and Tesla’s fresh record high.

While portraying the mood, Wall Street benchmarks refreshed all-time high while the S&P 500 Futures print mild gains by the press time.

Given the lack of major data/events ahead of Thursday’s US GDP, second-tier releases like US Consumer Confidence and Durable Goods Orders may entertain gold traders. Also important will be the moves of the US Treasury yields and headlines from China, as well as relating to the US stimulus.

Technical analysis

Despite the recent pullback, gold keeps upside break of the key hurdle comprising 200-DMA and a descending trend line from early June, now support around $1,793.

Given the bullish MACD signals and an absence of the overbought RSI conditions, not to forget the metal’s sustained trading beyond the $1,800 threshold, gold prices are likely rushing towards the $1,834 resistance, comprising tops marked since July.

During the quote’s upside past $1,834 will aim for the $1,900 round figure with the mid-$1,800s likely probing gold buyers on their way.

In a case of the latest declines dragging gold below $1,793 resistance-turned-support, bulls may not lose hope until the commodity remains beyond the monthly support line, around $1,777 by the press time.

Overall, gold is up for pleasing the bulls before the next test around $1,834.

Gold: Daily chart

Trend: Bullish