Gold Price Forecast: XAU/EUR eyes monthly hurdle around €1,590 on softer EUR, Omicron fears

• Gold prices benefit from risk-off mood, EUR weakness adds to the XAU/EUR strength.
• Omicron fears escalate, China, inflation-linked stories add strength to sour sentiment.
• Yields dwindle, stock futures print mild gains amid anxious markets.
• Gold Price Forecast: Risk-off underpins the bright metal in the near term

Gold (XAU/EUR) prints a three-day uptrend of around €1,600 while poking the weekly top amid Tuesday’s European morning. The yellow metal not only cheers the safe-haven demand but also benefits from the regional currency’s weakness.

Omicron fears and cautious sentiment ahead of the key central bank meetings can be linked to the market’s rush to risk safety. Adding to the sour sentiment were the chatters surrounding China and geopolitics.

Following the UK’s first Omicron-linked death and return of the mask mandate in California, Australia’s largest state, population-wise, New South Wales (NSW) reports the highest daily virus infections tally in more than two months.

Market chatters that Hong Kong-listed Shimao Group. is up for activating another China-linked financial crisis and concerns over Beijing’s growth, as raised by the Asian Development Bank (ADB), weigh on the sentiment.

Furthermore, Bloomberg’s news mentioning that the US House of Representatives and the Senate inch closer to an agreement over the Uyghur Bill aimed at China hints at escalated US-China tussles. On the same line was the latest update from Axios saying, “White House National Security Adviser Sullivan to visit Israel next week to discuss Iran.”

Against this backdrop, the US 10-year Treasury yields seesaw around 1.42% whereas the S&P 500 Futures rise 0.15% at the latest. Also portraying the risk-off mood is the firmer US Dollar Index (DXY) and downbeat EUR/USD prices.

Moving on, the Fed versus ECB drama is likely a big hit during the week as policymakers from the bloc are less hawkish, despite repeatedly failing to convince traders, than their counterparts at the US Federal Reserve. As a result, Wednesday’s FOMC and Thursday’s ECB will be crucial for the XAU/EUR traders. Even so, the virus updates and risk catalysts can offer intermediate clues to watch.

Technical analysis

XAU/EUR holds onto the bounce off 50-DMA and an ascending support line from late September amid the receding bearish bias of the MACD.

Given the recent higher-low formations, the gold prices are likely to extend the latest rebound towards the monthly resistance line near €1,590. However, a clear upside break of the stated resistance line will help the gold prices to revisit the €1,600 threshold and the €1,635 resistances.

Meanwhile, a convergence of the 50-DMA and aforementioned support line, around €1,568, restricts short-term declines of gold prices.

In a case where the XAU/EUR drops below €1,568, an ascending trend line from August, at €1,568 by the press time, will be crucial to watch as a break of which will direct bears towards November’s low of €1,524.

To sum up, gold prices regain upside momentum but the bulls have a bumpy road ahead.

Gold: Daily chart

Trend: Pullback expected