Gold Price Forecast: XAU/EUR retreats after two-month-old resistance rejected bulls, yields, inflation eyed

• Gold pares the biggest daily gains in a week, refreshes intraday low of late.
• Yields stay firmer amid escalating hopes of monetary policy normalization, easing virus woes.
• German inflation data will be important for the day after ECB’s Villeroy cited the need for easing price pressure.

Gold (XAU/EUR) takes offers to refresh intraday low near €1,599 heading into Wednesday’s European session. In doing so, the gold prices in Euro drops the most in a week, down 0.21% intraday by the press time.

That said, the quote refreshed weekly top the previous day after the Euro dropped on the broad US dollar rally tracking the firmer Treasury yields.

It should be noted, however, that the follow-on run-up by the German Bund yields and chatters from the ECB policymakers triggered the XAU/EUR pullback afterward.

France's central bank head and ECB governing council member François Villeroy de Galhau reiterated on Tuesday that French inflation is likely to fall back under 2.0% by the end of 2022. However, should inflationary pressures prove more persistent, he added, he has no doubt that the ECB would adapt its monetary policy faster. 

While reacting to the aforementioned catalysts, EUR/USD pays a little heed to Reuters poll stating, “Eurozone inflation is set to burn hotter throughout 2022 than expected a month ago, which could pressure the European Central Bank to tighten policy once the Omicron wave of the pandemic passes.”

Moving on, the second reading of the German Harmonized Index of Consumer Price (HICP) for December, expected to confirm 5.7% YoY initial forecasts, will be important.

Read: Why $10,000 an ounce for gold may not be that far away

Technical analysis

Gold prices remain pressured around intraday low after failing to cross a downward sloping resistance line from November 19.

Given the sluggish Momentum line and a pullback from the key resistance, XAU/EUR may witness further declines.

However, a confluence of the 50-DMA and 21-DMA, near €1,595 by the press time, will challenge the short-term declines ahead of an ascending trend line from August, close to €1,582.

It should be noted, though, that a clear downside break of €1,582 will make gold prices vulnerable to slump towards the lows marked during November and September 2021, respectively around €1,520 and €1,480.

Alternatively, the aforementioned resistance line limits the quote’s short-term rebound near €1,603.

Following that, the monthly high near €1,614 may act as an intermediate halt during the run-up to the late 2021 peak of €1,654.

To sum up, XAU/EUR remains sidelined for now but the upside momentum seems to have been exhausted in recent days.

Gold: Daily chart

Trend: Further weakness expected