Gold Price Forecast: XAU/USD ticks lower on modest US Dollar strength, downside seems limited


  • Gold price struggles to gain any meaningful traction and oscillates in a range on Monday.
  • Hawkish central banks and a modest US Dollar strength act as a headwind for the metal.
  • A softer risk tone could lend support to the safe-haven XAU/USD and limit the downside.

Gold price ticks lower on the first day of a new week and trades with a mild negative bias, just below the $1,955 level heading into the European session. 

The Federal Reserve (Fed) last week signalled that borrowing costs may still need to rise by as much as 50 basis points (bps) by the end of this year, which assists the US Dollar (USD) to gain some positive traction for the second successive day. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, looks to build on Friday's modest bounce from over a one-month low and acts as a headwind for the US Dollar-denominated Gold price.

Apart from this, a more hawkish outlook by major central banks further contributes to capping the upside for the non-yielding Gold price. It is worth recalling that the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) delivered a surprise 25 bps rate hike earlier this month. Moreover, the European Central Bank (ECB) last week lifted rates by 25 bps, to the highest level in 22 years, and projected indicated further tightening to bring down inflation.

The Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike interest rates by 25 bps later this week. That said, a generally weaker tone around the equity markets helps the safe-haven Gold price to hold its neck just above the 100-hour Simple Moving Average (SMA) support. Worries about a global economic downturn, particularly in China, weigh on investors' sentiment and drive some haven flows, warranting caution for bearish traders.

Investors might also prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's two-day congressional testimony on Wednesday and Thursday, which will be looked for fresh clues about the future rate-hike path. This, in turn, will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the Gold price. This makes it prudent to wait for some follow-through selling below the 100-day SMA before positioning for any further losses.

Technical levels to watch

XAU/USD

Overview
Today last price 1954.68
Today Daily Change -3.30
Today Daily Change % -0.17
Today daily open 1957.98
 
Trends
Daily SMA20 1956.8
Daily SMA50 1985.33
Daily SMA100 1942.08
Daily SMA200 1847.63
 
Levels
Previous Daily High 1967.96
Previous Daily Low 1953.34
Previous Weekly High 1971.01
Previous Weekly Low 1924.85
Previous Monthly High 2079.76
Previous Monthly Low 1932.12
Daily Fibonacci 38.2% 1958.92
Daily Fibonacci 61.8% 1962.38
Daily Pivot Point S1 1951.56
Daily Pivot Point S2 1945.14
Daily Pivot Point S3 1936.94
Daily Pivot Point R1 1966.18
Daily Pivot Point R2 1974.38
Daily Pivot Point R3 1980.8

 

 

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