Gold Price Forecast: XAU/EUR renews five-week top above €1,600 with eyes on 2022

• Gold stays on the front foot after rising the most in two weeks the previous day.
• Market sentiment improves, lack of data/events and year-end liquidity crunch to restrict moves.
• Multiple hurdles on the north will test buyers, Fed v/s ECB battle will be crucial.

Gold (XAU/EUR) pokes the highest levels since December 26, taking the bids around €1,608 during early European morning on Friday. In doing so, the yellow metal prices in Euro increase for the second consecutive day, extending a notable jump marked on Thursday.

The firmer US data and hopes of early Fed rate-hike favored the USD and weighed on the Euro, fueling the gold prices the previous day. However, the commodity’s latest run-up could be linked to the cautious optimism in the market amid a sluggish end of 2021.

That said, the Euro Index remains pressured amid worsening covid conditions and the resulted activity restrictions in the bloc. “In Europe, where almost one million people have died of coronavirus over the past 12 months, traditional concerts and firework displays that typically draw thousands of people onto the streets were canceled in most major cities, including London, Paris, Zurich, Brussels, Warsaw and Rome,” said Reuters.

Elsewhere, Reuters’ tally for the US seven-day average of new coronavirus cases refreshes record top for the second consecutive day with 290,000 latest figures.

Adding to the US dollar strength are the market fears, recently backed by geopolitical headlines. Iran’s space launch derails previous optimism concerning the denuclearization deal with the global leaders. On the same line were the dislikes of China and Hong Kong for the US push to release Hong Kong-based journalists. Also portraying the fears of the geopolitical tension were the headlines from Reuters over Ukraine, “US President Joe Biden and his Russian counterpart Vladimir Putin on Thursday warned each other that an escalation of tensions over Ukraine could rupture relations between the two countries, U.S. and Russian officials said.”

It should be noted that the US Dollar Index (DXY) prints mild gains around 96.05 during its second consecutive positive day. The S&P 500 Futures pare Asian session losses and help the gold buyers to stay hopeful amid hopes of fewer odds favoring hospitalization due to the South African covid variant, namely Omicron.

Looking forward, a light calendar and the yearn-end holiday mood can restrict XAU/EUR performance.

Technical analysis

Sustained trading beyond the 100-SMA level of €1,587 enables the XAU/EUR bulls to aim for the seven-week-old horizontal area near €1,610-12. However, an upward sloping trend line from December 07, near €1,616, adds to the upside filters.

In a case where the gold buyers manage to cross the €1,616 resistance, the odds of witnessing a rally towards €1,633 and November’s peak of €1,653 can’t be ruled out.

Alternatively, a downside break of the 100-SMA level surrounding €1,587 isn’t a green card for the XAU/EUR bears as the monthly support line will precede ascending trend line from December 15, respectively around €1,584-83, to challenge the quote’s further weakness.

To sum up, gold prices remain firmer but nearly overbought RSI conditions may trigger the quote’s pullback from nearby resistance.

Gold: Four-hour chart

Trend: Pullback expected