Gold Price Forecast: XAU/USD steadies above $1,800, additional gains are likely
- Gold broke out of last week's horizontal range on Monday.
- 200-day SMA forms the next significant resistance at $1,810.
- Broad-based USD weakness is helping XAU/USD gather bullish momentum at the start of the week.
Update: Following the strong rally witnessed in the early trading hours of the American session on Monday, the XAU/USD pair seems to have steadied above $1,800. At the time of press, gold was up 1.25 on a daily basis at $1,803. The data from the US showed on Monday that the Markit Manufacturing and Services PMIs both edged lower and missed the market expectations in August's advanced estimates. Nevertheless, these data were largely ignored by market participants and risk flows continue to dominate the financial markets in the second half of the day, putting additional weight on the safe-haven USD. Currently, the S&P 500 Index is trading at a new all-time high of 4,485, rising nearly 1%.
The XAU/USD pair fluctuated in a relatively tight range last week and struggled to make a decisive move in either direction. With the greenback coming under strong selling pressure at the start of the week, gold managed to break out of its horizontal range and touched its highest level in more than two weeks at $1,804. As of writing, XAU/USD was up 1.25% on the day at $1,803.
In the absence of high-tier macroeconomic data releases, improving market sentiment seems to be making it difficult for the USD to find demand. Reflecting the broad-based USD weakness, the US Dollar Index, which gained 1% last week, is down 0.32% on the day at 93.15.
Earlier in the day, the only data from the US revealed that the Federal Reserve Bank of Chicago's National Activity Index improved to 0.53 in July from -0.01.
Later in the session, the IHS Markit's preliminary Manufacturing and Services PMI reports will be featured in the US economic docket alongside July Existing Home Sales.
In the meantime, Wall Street's main indexes remain on track to start the day in the positive territory, suggesting that risk flows will continue to dominate the financial markets in the second half of the day.
Gold technical outlook
With this recent upsurge, gold is now trading above both the 20-day and the 50-day SMAs. Additionally, the Relative Strength Index (RSI) indicator on the daily chart turned north, suggesting that the bullish momentum is gathering strength.
On the upside, the 200-day SMA is forming strong resistance at $1,810. Moreover, the 100-day SMA is also floating around that level, reinforcing that hurdle. A daily close above that area could open the door for additional gains toward the next static resistance at $1,830 and $1,845.
On the other hand, $1,800 (psychological level) aligns as the first support ahead of $1,790/85 (20-day SMA, 50-day SMA) and $1,780 (static level).
Additional levels to watch for
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
