Gold Price Forecast: XAU/EUR eyes to regain €1,600 amid mixed concerns

• Gold snaps two-day downtrend, bounces off weekly low.
• Softer yields, Euro favor buyers even as Omicron, fears of US data test the upside moves.
• EU spending rules challenged, US BBB stays indecisive.

Gold (XAU/EUR) stays positive around €1,586, rejecting the previous two-day declines, ahead of Wednesday’s European session.

The gold prices, in Euro terms, seem to benefit from the downbeat yields and firmer US dollar, which in turn weigh on the EUR. However, challenges to the sentiment are likely testing the XAU/EUR buyers of late.

The US Dollar Index (DXY) rises for the first time in three days, up 0.10% intraday around 96.55 at the latest, as cautious mood ahead of the second-tier US data favors the greenback demand. Adding to the DXY strength is the indecision over President Joe Biden’s Build Back Better (BBB) stimulus plan as policymakers remain hopeful despite Senator Joe Manchin’s rejection to favor the bill.

Elsewhere, European countries might have to rethink over their spending plans after the latest warning from Valdis Dombrovskis, European Commission Executive Vice-President. “EU member states will still need to offer ‘credible’ plans to cut their debts even if they are allowed extra leeway to make green investments,” said EU’s Dombrovskis per the Financial Times (FT).

It’s worth noting that the stronger activity restrictions in the bloc and hopes of the cure to Omicron, recently emanating from the US, seem to challenge the pessimists.

Amid these plays, the US 10-year Treasury yields dropped two basis points (bps) to 1.465% whereas the S&P 500 Futures struggles for moves, reversing early Asian losses, tracking the Wall Street benchmarks that snapped a three-day downtrend.

Moving on, risk catalysts are the key while final Q3 GDP and the CB Consumer Confidence for December will be important to watch looking forward.

Technical analysis

Gold prices remain inside a bullish chart pattern, namely falling wedge, as 200-HMA defends the buyers. Given the steady RSI line, the latest rebound is likely to extend.

However, the 50-HMA adds strength to the resistance surrounding €1,590, a break of which will confirm the bullish trajectory towards €1,610.

It’s worth noting that the monthly high near €1,603 and November’s peak of €1,653 are some extra numbers to the north to consider for XAU/EUR bulls.

Meanwhile, a downside break of the 200-HMA level of €1,583 isn’t a green card for the gold sellers as a lower line of the wedge, near €1,581 will test the further downside.

Even if the quote drops past €1,581, the 61.8% Fibonacci retracement of December 15-20 upside, near €1,575 will act as an additional downside filter.

XAU/EUR: Hourly chart

Trend: Further recovery expected