Gold Price Forecast: Hidden bearish divergence, firmer yields tease XAU/USD sellers below $1,800

• Gold struggles to extend the previous day’s rebound despite recently picking up bids.
• Market sentiment improves as policymakers placate Omicron fears, US stimulus chatters also add to risk-on mood.
• US data eyed as bearish formation hints at seller’s return. 
• Powell sent gold above $1,800: But only for a short while

Gold (XAU/USD) stays mildly bid around $1,790, up for the second consecutive day during Wednesday’s Asian session. Even so, the metal fails to track other risk barometers, like Antipodeans and WTI, to portray risk-on mood. The reason could be linked to the market’s cautious sentiment ahead of a slew of the US data as well as a bearish chart pattern.

Global policymakers’ rejections of the major lockdown measures ahead of the Christmas holidays, despite the latest spread of the South African covid variant, dubbed as the Omicron, seemed to have favored the sentiment. Also positive for gold were US President Joe Biden’s expectations of getting the “Build Back Better (BBB)” plan done as well as vaccine/treatment optimism.

Even as Texas reported the first Omicron-linked death in the US, President Joe Biden refrained from any national lockdowns, as already revealed, while also pushing for faster vaccinations. On the same line were cautious optimism emanating from Pacific nations and the UK. Furthermore, news that the US Food and Drug Administration (FDA) is up for authorizing a pair of pills from Pfizer and Merck to treat Covid-19 as soon as this week, per Bloomberg’s sources, also underpinned the risk-on mood.

Additionally, “President Biden on Tuesday said he thinks there is still a possibility that his Build Back Better agenda can get done, despite Sen. Joe Manchin’s opposition of the climate and social spending bill,” said The Hill.

On the contrary, a recovery in the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, ahead of the key US data set for this week challenges the gold buyers. Furthermore, the Sino-American and the US-Russia tussles add to the bearish bias for gold prices.

That said, the US Treasury yields rose 4.8 basis points (bps) to 1.467% whereas the Wall Street benchmarks snapped a three-day downtrend by the end of Tuesday’s North American session. The S&P 500 Futures, however, drops 0.10% intraday by the press time.

Moving on, gold traders may reassess the latest market optimism despite the Omicron woes and firmer inflation expectations ahead of the US data.

Read: Conference Board Consumer Confidence December Preview: Where do Americans turn for optimism?

Technical analysis

Gold portrays a hidden bearish divergence pattern following its break of an ascending trend line from late September. Adding to the bearish bias is the failure to cross the 200-SMA and the downbeat MACD signals.

A hidden bearish divergence can be identified when the prices make lower high but the oscillator, here the RSI, makes higher high.

That said, the pullback moves can initially eye 61.8% Fibonacci retracement (Fibo.) level of September-November advances, near $1,781, a break of which will direct gold bears to 78.6% Fibo. surrounding $1,754.

In a case where gold prices remain weak past $1,754, the $1,745 and $1,733 may act as intermediate halts before highlighting September’s low of $1,721.

Meanwhile, recovery moves remain elusive below the support-turned-resistance line near $1,814. It’s worth noting that the 200-SMA level of $1,808 acts as an immediate upside barrier.

Following that, November 09 swing high around $1,833 and $1,845-50 region can challenge gold buyers ahead of favoring the run-up to the last month’s peak of $1,877.

Gold: Four-hour chart

Trend: Pullback expected