Gold Price Forecast: XAU/USD dips below $1,750, but buyers defend $1,720 support

• The price of gold falls close to 0.80% due to the strength of the dollar.
• The Federal Reserve’s comments last week continue to weigh on investor sentiment.
• Gold Price Watch: Support around $1,727, if broken, will expose the 100 DMA.

the price of gold lower amid a drive for risk aversion, which triggered a flight to safe assets. The dollar remains propped up by investor concerns that the recent outbreak of Covid-19 in China could prompt authorities to reimpose restrictions. Therefore, the precious metal segment is on the downside, as shown by XAU/USD which is trading at $1,735, losing 0.87%.

Dollar rise weighs on gold prices on sour sentiment

Sentiment remains negative, as evidenced by Wall Street posting losses of between 0.32% and 1.08%. The narrative of the financial markets has not changed since the October Consumer Price Index (CPI) report from the United States (USA), which cooled, while the Producer Price Index (PPI) did the same. Although both reports showed prices stabilizing, speculation that the Fed might pause raising rates served to fuel a rally in stocks, which weighed on the dollar. However, last week’s strong US Retail Sales data increased the likelihood that the Fed will tighten further.

In this sense, the officials of the US Federal Reserve continued to express their commitment to bring inflation towards its 2% target, but said that the rate of increases could moderate already in the December meeting. However, St. Louis Fed President James Bullard spooked investors by saying rates are not “tight enough” and adding that he expects the FFR to peak at between 5% and 6%. Atlanta Fed President Raphael Bostic echoed some of his comments, adding that he favors slowing the pace of interest rate hikes and sees an additional 75-100 point rate hike. basics of the FFR.

In terms of data, on the US economic calendar, the Chicago National Activity Index fell into negative territory in October, down to -0.05 from 0.17 in September, triggering a reaction in XAU/USD. Meanwhile, the Dollar Index, which measures the value of the dollar against its peers, extended its gains by 0.93% to 107,967, posting a new one-week high.

Elsewhere, US Treasury yields are extending their gains, particularly the benchmark 10-year note yielding 3.818%, propping up the dollar. Another headwind for gold prices is the Real Yield, which is calculated by the US 10-year nominal yield minus inflation expectations for the same period, which remains positive at 1.71% at the end of the year. last Friday.

On the US agenda will be the Fed’s regional manufacturing indices, along with other Fed speeches.

Gold (XAU/USD) Price Forecast: Technical Perspective

Gold price continues to have a neutral-upward bias, comfortably above the psychological $1,700 level, although the slope of the Relative Strength Index (RSI) is pointing lower, accelerating towards its center line. Crossing the center line of the RSI will compound XAU/USD’s slide towards the 100-day EMA at $1,711, ahead of the aforementioned $1,700 figure. Key XAU/USD resistance levels are at $1,750, followed by the November high of $1,786, before $1,800.