Gold Price Forecast: XAU/USD holds near $1,780 despite recovering US T-bond yields

• Gold is trading above $1,780 in early American session.
• 10-year US Treasury bond yield rose into the positive territory above 1.6%.
• Greenback remains on the back foot after disappointing US data.

The XAU/USD pair broke above $1,770 in the European session and climbed to a daily high of $1,785 in the last hour before edging slightly lower. As of writing, the pair was up 0.85% on the day at $1,780.

Earlier in the day, the broad-based selling pressure surrounding the dollar and falling US Treasury bond yields fueled the gold's rally.

With risk flows dominating the financial markets, the US Dollar Index (DXY) dropped to a multi-week low of 93.50. The data from the US showed on Tuesday that Housing Starts and Building Permits fell by 1.6% and 7.7%, respectively, in September. Although the initial market reaction to these readings was largely muted, the dollar started to find some demand on the back of recovering US T-bond yields.

At the moment, the benchmark 10-year US T-bond yield is up 0.5% on the day at 1.61% and the DXY is down 0.28% at 93.68, capping gold's upside for the time being.

Meanwhile, major equity indexes in the US remain on track to open in the negative territory, suggesting that the greenback is likely to remain on the back foot if the market mood remains upbeat in the second half of the day.

There won't be any high-tier data releases from the US in the remainder of the day and investors will remain focused on the risk perception and yields.

Gold technical outlook

The Relative Strength Index (RSI) indicator on the four-hour chart is holding near 60, suggesting that there is more room on the upside before gold becomes technically overbought. Additionally, the previous two candles on the same chart closed above the 200-day SMA, confirming the bullish bias. 

The initial resistance is located at $1,787 (September 22 high) ahead of $1,800 (psychological level, static resistance). On the downside, $1,770 (former resistance, 200-period SMA) aligns as the first support before $1,763/60 (static level, 100-period SMA) and $1,750 (static level).