Gold Price Forecast: XAU/USD Lower, Fall Seems Limited Amid Less Aggressive Fed

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  • Gold price has pulled back from the weekly high set on Friday and is being pressured by a combination of factors.
  • The rally in US Treasury yields, the rebound in the dollar and the positive tone of risk undermine the metal.
  • Bets on a less aggressive rate hike by the Federal Reserve help limit XAU/USD losses.

the price of gold It is back from the weekly highs reached earlier this Friday and remains on the defensive until the middle of the European session. The XAU/USD It is currently sitting just above the $1,750 level, and appears to have snapped a three-day winning streak for now. However, the decline lacks follow through and warrants caution before confirming that the two-day uptrend from the $1,725 ​​area, near the two-week lows hit on Wednesday, has run out.

The modest rise in the dollar and the positive tone of risk weigh on the price of gold

The dollar attracts some buying amid a modest rally in US Treasury yields, which, in turn, is seen as a key factor acting as a headwind for the price of dollar-denominated gold . Apart from this, the generally positive tone in the equity markets seems to dampen the demand for the XAU/USD, which is a safe haven. That said, the firmness of expectations for a less aggressive policy tightening by the Federal Reserve is keeping any significant gains for the dollar at bay and helping to limit the fall of the yellow metal, which does not produce yields.

Dovish signals from the Federal Reserve act as a tailwind for the gold price

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In fact, the minutes of the November Federal Open Market Committee (FOMC) meeting, released on Wednesday, showed that officials were largely content to stop pre-empting rate hikes. The dovish signal validated the inflation-peak narrative and reaffirmed bets for a relatively minor rate hike of 50 basis points at the next FOMC policy meeting in December. This, in turn, dragged the 10-year US government bond yield to its lowest level since early October, which, in turn, should constrain the dollar.

COVID-19 woes in China help limit gold price losses

Furthermore, the worsening of the COVID-19 situation in China and the imposition of new lockdowns could also provide some support for the safe haven XAU/USD. In the absence of any major economic releases, traders may also refrain from making aggressive bets on the gold price amid relatively minor trading volume on the last day of the week. However, the precious metal remains on track for modest weekly gains as attention turns to next week’s US macroeconomic releases, including the NFP report, which is closely watched by traders.

Market participants expect next week’s US macroeconomic data to provide further impetus

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Apart from this, traders will be benchmarking the preliminary third-quarter GDP report on Wednesday and the core consumer price index, the Fed’s preferred inflation gauge, on Thursday. This, coupled with Federal Reserve Chairman Jerome Powell’s speech, will play a key role in influencing near-term dollar price dynamics and providing further directional momentum to the gold price.

Gold Price Technical Outlook

Technically, any further slide below the $1,750 level seems to find decent support near the $1,736 to $1,735 region. The next relevant support for the gold price is set near the $1,725 ​​area, or a two-week low hit on Wednesday. A convincing break below the latter could trigger some technical selling and drag prices towards the $1,700 area.

On the other hand, the $1,760 to $1,762 zone seems to have become an immediate hurdle. Follow-through buying will be seen as a new trigger for the bulls and push the price of gold up to the $1,772 barrier. Momentum could extend towards the $1,778 area en route to the $1,786 region, or the highest level since mid-August hit earlier this month.

Key levels to watch

XAU/USD

Overview
Last price today 1751.09
today’s daily change -3.96
Today’s daily change % -0.23
today’s daily opening 1755.05
Trends
daily SMA20 1715.38
daily SMA50 1685.27
daily SMA100 1711.94
daily SMA200 1799.71
levels
previous daily high 1758.68
previous daily low 1749.26
Previous Weekly High 1786.55
previous weekly low 1747.6
Previous Monthly High 1729.58
Previous monthly minimum 1617.35
Daily Fibonacci of 38.2%. 1755.08
Fibonacci 61.8% daily 1752.86
Daily Pivot Point S1 1749.98
Daily Pivot Point S2 1744.91
Daily Pivot Point S3 1740.56
Daily Pivot Point R1 1759.4
Daily Pivot Point R2 1763.75
Daily Pivot Point R3 1768.82

Source: Fx Street

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