Gold Price Forecast: XAU/USD tumbles from 5-month high, below $1800

Gold price retraces after hitting a multi-month high at $1810, spurred by high US Treasury yields and a risk-off impulse. Factors like the latest employment report in the United States (US) cementing the tightness of the labor market caused a jump in US bond yields. China’s easing Covid-19 restrictions kept the yellow metal from appreciating. At the time of writing, the XAU/USD is trading at $1776., down 1.30%.

Gold capped by a solid US employment report

US stocks are set to open lower, as depicted by equity futures. Last week’s employment report, November’s Nonfarm Payrolls (NFP) jumped 263K, above 200K estimates, while the Unemployment Rate, at 3.7%, remained unchanged. Average Hourly Earnings rose by 5.1%, vs. 4.9% forecasts, which would keep the US Federal Reserve (Fed) liftin rates, even if it means at 50 bps increases. In his Wednesday speech, Fed Chairman Jerome Powell said, “the principal wage measures that we look at, I would say that you’re one and half or two percent above that (which is consistent with two percent inflation over time).”

US yields rise on Monday, stalling Gold’s rally

Aside from this, the US 10-year Treasury bond yield is rising nine bps, from 3.502% to 3.597%, while US Real Yields, which reflect the interest of the nominal yield minus inflation expectations, remain at 1.16% as of Friday, a headwind for Gold. XAU/USD remains heavy, falling more than 1%, as Wall Street opened.

China’s progresses towards easing Covid-19 restrictions

Over the weekend, Chinese authorities are beginning to relax testing requirements across major cities, as Beijing shifts from Covid-19 zero-tolerance measures, amid elevated reports of the virus contagion. Chinese Vice Premier Sun Chunlan said last week that the country’s pandemic control had entered a new phase. Confronted with evolving challenges and tasks, the government will take small, consistent steps to optimize Covid measures.

Gold Price Forecast: XAU/USD Technical Outlook

The XAU/USD daily chart suggests Gold is still upward biased but could consolidate soon. Oscillators like the Relative Strength Index (RSI) and the Rate of Change (RoC) portray negative divergence with price action, which exacerbated the fall beneath $1800. Nevertheless, if XAU/USD price remains above the Exponential Moving Averages (EMAs), that could keep the non-yielding metal uptrend intact.

Hence, the XAU/USD first resistance would be the psychological $1800. Break above will expose December’s 5 high of $1810, followed by the June 17 high of $1857.20, followed by June’s 13 daily high at $1879.45. On the other hand, the XAU/USD first support would be $1778.68, followed by December’s low at $1767.70 and the 200-day EMA at $1759.92.