Gold Price Forecast: Bull flag reaffirms XAUUSD strength above $1,680, US midterm results eyed

• Gold price retreats from one-month high but defends a bullish chart pattern.
• Fears of US government gridlock, China covid woes weigh on XAUUSD prices of late.
• US inflation, risk catalysts will be important for fresh impulse.

Gold price (XAUUSD) pares recent gains around a one-month high, pressured near $1,708 during early Wednesday morning in Europe. In doing so,

The bright metal portrays the market’s anxiety amid the early results of the US mid-term elections. However, an immediate bull flag chart pattern keeps the buyers hopeful ahead of the key US Consumer Price Index (CPI) data, up for publishing on Thursday.

Given the escalating fears of the US government gridlock due to the latest updates from the mid-term elections, the US dollar pares losses near the seven-week low while snapping a two-day downtrend. That said, the US Dollar Index (DXY) prints mild gains around 109.70 by the press time.

Additionally weighing the XAUUSD price could be the fresh covid woes from China. That said, China reports the highest levels of new COVID cases in six months, with the latest addition of 8,335 for November 08, while marking a fresh virus-led lockdown in Guangzhou’s second district.

It’s worth noting, however, that the previously downbeat comments from the Fed policymakers and softer US data, as well as the bull flag on the hourly chart, keep the gold buyers hopeful. That said, the S&P 500 Futures struggle to track Wall Street’s gains while the US 10-year Treasury yields probe bears after snapping a four-day downtrend the previous day.

Moving on, gold traders may closely observe political and covid updates for fresh directions ahead of Thursday’s US inflation data. Should the Republicans gain victory in at least one of the two houses, the metal may witness further downside. However, a likely easing in the US CPI could defend buyers afterward.

Technical analysis

Although MACD teases a bear cross as the gold prices step back from the monthly peak, the yellow metal defends the bull flag chart pattern and keeps the buyers hopeful unless the quote stays beyond $1,705 support.

Even if the bullion breaks the $1,705 support, the $1,700 threshold and a one-week-old ascending trend line, near $1,678, could challenge the XAUUSD downside.

Alternatively, an upside clearance of the $1,715 hurdle will trigger a fresh leg toward the north and highlight the theoretical target of $1,765. However, October’s peak of $1,730 and September’s high near $1,735 could test the bulls on their way.

Overall, gold price remains firmer unless breaking the $1,680 support.

Gold: Hourly chart

Trend: Further upside expected