Gold Price Forecast: XAU/USD tracks sluggish yields below $1,800 with eyes on Fed

• Gold prices remain sidelined between key trend lines, below crucial SMA convergence.
• Market sentiment dwindles as US inflation matched forecasts but Fed rate hike talks stay on the table.
• US Treasury yields struggle to extend first weekly gains in five, S&P 500 Futures post mild gains.
• Gold Price Weekly Forecast: XAU/USD is at the mercy of the Fed, ascending triangle pattern in play

Gold (XAU/USD) stays directionless around $1,786, keeping the monthly sideways performance amid Monday’s Asian session.

The yellow metal benefited from the US inflation data the previous day but the market’s anxiety ahead of the key central bank meetings and the virus fears challenge the buyers of late. It should be noted, however, that the options market keeps the bearish bias over the commodity, as per the weekly risk reversals (RR).

The US Consumer Price Index (CPI) flashed a fresh 39-year high but matched market forecasts of 6.8% YoY for November. Also adding to the previous relief rally were the stable inflation expectations revealed via the University of Michigan Consumer Sentiment Index. That said, the RR, a gauge of calls to puts, marked a five-week downtrend with the latest figures of -0.1000.

Friday’s consolidation helped equities and weighed on the US Treasury yields, as well as the US Dollar Index (DXY). Though, markets turn cautious as the key week begins, comprising the monetary policy meeting of the US Federal Reserve (Fed).

Given the escalating fears of the Fed’s rush towards faster tapering and rate hikes, gold prices are likely to remain pressured. However, the US 10-year Treasury yields need to keep the recent rebound should the gold bears aim for further dominance.

Against this backdrop, the key US Treasury bond coupons take rounds to 1.49% whereas the S&P 500 Futures rise 0.20% by the press time.

In addition to Fed-linked woes, covid updates and the US-China tussles are also important to watch for clear direction amid a light calendar on Monday.

Technical analysis

Although a clear break of the previous support line from September 30 precedes the sustained trading below 100-SMA and 200-SMA, gold buyers lurk around a four-month-old ascending trend line.

Given the receding bearish bias of the MACD signals and mostly steady RSI, the bears are likely fading the strength. However, the stated DMAs around $1,790-95 and the support-turned-resistance line close to $1,800 will keep the bulls away.

Adding to the upside filter is the $1,815 level and tops marked in July, as well as September, surrounding $1,834.

On the contrary, a downside break of the multi-day-old support line, close to $1,769 at the latest, will need validation from the 61.8% Fibonacci retracement (Fibo.) of August-November upside surrounding $1,759 to convince the gold sellers.

To sum up, gold prices depict traders’ indecision as the key week begins.

Gold: Daily chart

Trend: Sideways