Gold Price Forecast: XAU/EUR consolidates around €1,631, as German Bund 10-year yield rises

• XAU/EUR reaches a new year-to-date high at €1,634.04.
• Demand for gold increases as global inflation rises, and investors turn to the yellow metal as a hedge.
• XAU/EUR: RSi in overbought conditions suggests a correction towards €1,604 is on the cards.

Gold spot against the euro (XAU/EUR) is steady around the year-to-date high at €1,634.04, after edging up some 0.15% to trade at €1,632 during the day at the time of writing. As the week began, the precious metal extended its rally to eight days in a row.

During the Asian session, the precious metal edged lower towards the €1,620 lows, however, it found support around the 50-simple moving average (SMA), spiked towards the new 2021 yearly high at €1,634.04 and retreated above the 50-hour simple moving average at press time.

In the meantime, the German 10-year Bund yield has gained one basis point, though remains negative at -0.245%, caping the upside move in XAU/EUR.

According to TD analysts in a note to customers, “gold prices have managed to break out nonetheless as global markets scour for inflation-hedges.” The note further added, that “the breakout in gold has driven the China Smart Money group of funds to add a significant amount of new length in SHFE gold, which highlights a potential avenue for a significant amount of buying interest, considering that Shanghai gold net length remains near multi-year lows.”

XAU/EUR Price Forecast: Technical outlook

Daily chart

The non-yielding metal has an upward bias as depicted by daily moving averages (DMA’s) below the spot price. At time of writing it is testing the top trendline of the Andrew Pitchfork’s indicator, however, the Relative Strength Index (RSI) at 76 is in overbought conditions for the last four days, which suggests the possibility of a correction towards the November 13, 2020, high at €1,604.

If that outcome were to come to pass, and once the RSI exited overbought conditions, a test towards the November 9, 2020 high at €1,652 would be on the books, but it would find some hurdles on the way north. Initial resistance would come at €1,634.04. A breach of the latter would expose the top trendline of the Pitchfork’s indicator around €1,640-50.