Gold Price Forecast: XAU/USD refreshes weekly tops, $1,800 back in sight

• A combination of factors assisted gold to regain positive traction on Wednesday.
• Retreating US bond yields weighed on the USD and extended support to the metal.
• The cautious market mood further benefitted the commodity’s safe-haven status.
• Gold Price Forecast: XAU/USD’s bullish potential appears limited amid bear cross

Gold gained positive traction for the second successive day and shot to fresh weekly tops, closer to the $1,790 level during the early North American session. The US dollar struggled to capitalize on the previous day's bounce from three-week lows, instead met with some fresh supply on Wednesday. This was seen as a key factor that acted as a tailwind for the dollar-denominated commodity. Apart from this, the cautious market mood further extended some support to the safe-haven precious metal.

Meanwhile, the latest leg of a sudden spike over the past hour or so could be attributed to a modest pullback in the US Treasury bond yields, which benefitted the non-yielding gold. In fact, the yield on the benchmark 10-year US government bond witnessed an intraday turnaround from the highest level since May amid moderation of Fed hike expectations. This week's dismal US macro releases – Industrial Production and housing market data – pointed to weakening economic activity and tempered market expectations for an early policy tightening by the Fed.

That said, worries that the recent widespread rally in commodity prices will stoke inflation might force the Fed to adopt a more aggressive policy response in 2022. This, in turn, might hold investors from placing aggressive bullish bets around gold and cap the upside, at least for the time being. In the absence of any major market-moving economic releases from the US, traders might take cues from a scheduled speech by Fed Governor Randal Quarles. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the commodity. Apart from this, the broader market risk sentiment might provide some impetus to the XAU/USD.

Technical outlook

From a technical perspective, any subsequent positive move is likely to confront stiff resistance near the $1,800 level. The mentioned handle marks a confluence hurdle comprising technically significant 100/200-day SMAs and should act as a key pivotal point for short-term traders. A sustained breakthrough, leading to a subsequent strength beyond the $1,808-10 region, should pave the way for a move towards challenging the $1,832-.34 heavy supply zone.

On the flip side, immediate support is pegged near the $1,775 level, below which gold prices could slide back towards the $1,763-60 region. Some follow-through selling will negate any near-term positive bias and prompt some technical selling, exposing the $1,750 support zone. The downward trajectory has the potential to drag the XAU/USD further towards September monthly swing lows, around the $1723-21 area. 

Gold daily chart

Levels to watch