Gold Price Forecast: XAU/USD inches closer to $1,800 amid sliding bond yields/weaker USD

• Gold attracted some dip-buying for the second successive day on Wednesday.
• Retreating US bond yields, weaker USD acted as a tailwind for the commodity.
• Hawkish central bank expectations might continue to cap gains for the metal.
• Gold Price Forecast: 50-DMA to test bulls’ commitments again, as focus shifts to US data, central banks

Gold continued showing some resilience below the 100/200-day SMA confluence and attracted some dip-buying ahead of the $1,780 level for the second successive day. The intraday uptick pushed spot prices to the $1,796 region, or fresh daily highs during the early North American session, albeit lacked follow-through. The US dollar met with some fresh supply on Wednesday and reversed the previous day's upbeat US macro data-inspired gains to over one-week tops. This, in turn, was seen as a key factor that acted as a tailwind for dollar-denominated commodities, including gold.

Apart from this, a softer tone around the equity markets extended additional support to the safe-haven precious metal. Bulls further took cues from an extension of the recent pullback in the longer-dated US Treasury bond yields, which tends to benefit the non-yielding gold. In fact, the yield on the benchmark 10-year US government bond declined for the fourth straight session and slipped below the 1.60% threshold. Conversely, the yield on short-dated US government bonds rose to the highest level since March 2020 amid rising bets for an early policy tightening by the Fed.

Investors seem convinced that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Adding to this, the markets have been pricing in the possibility of a potential interest rate hike by the Bank of England sooner rather than later. The Bank of Japan and the European Central Bank are also scheduled to announce their policy decision on Thursday, though are not anticipated to announce a change in the policy stance. Nevertheless, the hawkish outlook might cap gains for gold heading into the key central bank meetings.

Technical outlook

From a technical perspective, the emergence of fresh buying at lower levels favours bullish traders. The positive outlook is reinforced by the fact that technical indicators on the daily chart are holding in the bullish territory. That said, the recent pullback from an intermediate hurdle near the $1,812-14 region warrants some caution. This makes it prudent to wait for a strong follow-through buying beyond the mentioned barrier before positioning for any further gains. Gold might then accelerate the momentum further towards challenging the $1,832-34 heavy supply zone.

On the flip side, the $1,783-82 region now seems to have emerged as immediate strong support. A convincing break below might prompt some technical selling and drag the XAU/USD towards the next relevant support near the $1,765-64 zone en-route monthly swing lows, around the $1,745 area. Failure to defend the mentioned support levels will shift the bias in favour of bearish traders and turn gold vulnerable to test $1,722-21 support before eventually dropping to the $1,700 round-figure mark.

Technical levels to watch