Gold Price Forecast: XAU/USD has limited upside potential, caution for bulls

Gold gains positive traction on Tuesday and snaps a two-day losing streak to over a two-year low. The upside potential, however, seems limited, FXStreet’s Haresh Menghani report.

XAU/USD seems poised to break below $1,600

“The fundamental backdrop suggests that the path of least resistance for the metal is to the downside. The attempted recovery move runs the risk of fizzling out rather quickly.”

“Any subsequent move up is more likely to confront resistance near a one-week-old trading range support breakpoint, around the $1,654-$1,656 region. Sustained strength might trigger a short-covering move towards the $1,675-$1,676 supply zone. Some follow-through buying will negate any near-term negative bias and pave the way for additional gains, allowing bulls to aim back to reclaim the $1,700 round-figure mark.”

“The YTD low, around the $1,620 area, now seems to protect the immediate downside ahead of the $1,620-$1,590 region. A break below here will be seen as a fresh trigger for bearish traders and drag gold towards the $1,567-$1,565 support zone. The downward trajectory could extend towards the $1,530-$1,528 region, below which the XAU/USD might turn vulnerable to challenge the $1,500 psychological mark.”