Gold Price Forecast: XAU/EUR bears seek validation from €1,586 on subdued sentiment

• XAU/EUR fades bounce off two-week low, recently pressured around intraday low.
• Market sentiment dwindles amid mixed concerns over Omicron, firmer yields.
• ECB’s Visco said ECB won’t end tapering before 2023.

Gold (XAU/EUR) prints a three-day downtrend as sellers attack €1,587 level heading into Thursday’s European session. In doing so, the yellow metal bears the burden of firmer US Treasury yields amid sluggish final days of 2021.

US Treasury yields rallied the most in three weeks after the US seven-year Treasury bond auction showed disappointing demand for the government securities, previously weighed on the greenback. On the same line were the US data showing that Pending Home Sales for November dropped below the forecast of +0.5% to -2.2% MoM whereas Good Trade Balance hit a record deficit of $-97.8B versus $-83.2B prior. Additionally, the German Bund Yields jumped the most in six weeks to a two-month high the previous day amid hopes that the bloc will be able to overcome the pandemic.

It’s worth noting that the recent comments from ECB Governing Council member Ignazio Visco also weigh on the XAU/EUR prices. The policymaker said, “See no reason to reassess inflation target of 2%.”

Furthermore, recently escalating fears of the South African covid variant, namely Omicron, join geopolitical headlines to also weigh on the gold prices.

The record covid cases in multiple nations seem to push policymakers towards rethinking over the previous easing of activity restrictions during the holiday period. Recently, Australia Prime Minister (PM) Scott Morrison said, “Omicron indicates that Australia needs to reset its pandemic response.”

On the other hand, Reuters quotes US Secretary of State Antony Blinken said, “The US urges Chinese and Hong Kong authorities to release stand news staff members immediately.” Earlier in the day, Saudi Arabia’s King Salman bin Abdulaziz raised concerns over Iran’s lack of cooperation with the international community on its nuclear program and ballistic missile development.

Amid these plays, Treasury yields in the EU and the US remain firmer while stock futures remain pressured.

Looking forward, XAU/EUR traders will need to pay attention to the US Weekly Jobless Claims and Chicago Purchasing Managers’ Index for December, expected 205K and 62 versus 205K and 61.8 respectively, for fresh impulse. Also important will be covid updates and news concerning Iran and China.

Technical analysis

A U-turn from the monthly resistance line joins bearish MACD signals and downbeat RSI line to keep Gold (XAU/EUR) sellers hopeful.

However, a convergence of the 100-SMA and 50% Fibonacci retracement (Fibo.) of November’s upside challenges the metal’s immediate declines around €1,586.

Following the quote’s weakness past €1,586, a joint between upward sloping trend line from November 03 and 61.8% Fibo. will challenge the XAU/EUR bears near €1,570.

Alternatively, recovery moves may initially aim for the 38.2% Fibonacci retracement level near €1,602 before again challenging the aforementioned resistance line near €1,607.

Adding to the upside filters is the late November’s swing high near €1,610, a break of which will recall €1,633-34 area on the chart.

XAU/EUR: Four-hour chart

Trend: Further weakness expected