Gold Price Forecast: XAU/USD hangs near multi-week low, bears flirt with $1,800 mark

• Gold struggled to preserve its modest intraday recovery gains from a near three-week low.
• Hawkish Fed expectations, elevated US bond yields, stronger USD contributed to cap gains.
• COVID-19 jitters could lend support to the safe-haven metal and help limit the downside.

Gold gained some positive traction during the first half of the trading action on Tuesday, albeit struggled to capitalize on the move. The XAU/USD has now surrendered a major part of its intraday gains and was last seen trading just above the $1,800 mark, around the lowest level in nearly three weeks touched in the previous day.

The recent US dollar rally got a strong boost on Monday after US President nominated Jerome Powell to serve as the Fed chairman for a second term. The fact that investors considered the other leading candidate, Lael Brainard, to be the more dovish of the two, the announcement reinforced bets for higher US interest rates. This, in turn, pushed the USD Index to a 16-month peak and prompted aggressive selling around the dollar-denominated gold.

Meanwhile, growing acceptance for an early policy tightening by the Fed triggered a fresh leg up in the US Treasury bond yields. In fact, the yield on the two-year US Treasury note, which is highly sensitive to interest rate expectations, shot to the highest level since March 2020. Adding to this, the yield on the benchmark 10-year US government bond surged past the 1.60% threshold. This further underpinned the greenback and acted as a headwind for the non-yielding yellow metal.

That said, concerns over the rising number of COVID-19 cases in Europe and the reimposition of lockdown measures extended some support to traditional safe-haven assets. This might hold back bearish traders from placing aggressive bets and help limit deeper losses for gold prices. Hence, it will be prudent to wait for acceptance below the $1,800 mark before positioning for an extension of the recent sharp pullback from the $1,877 region, or a multi-month top set last week.

Market participants now look forward to the US economic docket, featuring the release of the flash PMI prints for November. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Apart from this, traders will further take cues from developments surrounding the coronavirus saga to grab some short-term opportunities around the XAU/USD. The key focus, however, will remain on Wednesday's releases from the US – the Prelim (second estimate) Q3 GDP, Durable Goods Orders, Core PCE Price Index and the FOMC meeting minutes.

Technical outlook

From current levels, any subsequent fall below the $1,800 mark is likely to find decent support near the $1,791-89 confluence comprising of technically significant 100 and 200-day SMA. A convincing break below would suggest that gold has topped out in the near term and pave the way for a slide to the next relevant support near the $1,770-68 horizontal zone.

On the flip side, the daily swing high, around the $1,812-13 region, now seems to act as an immediate resistance ahead of the $1,825-26 area. Some follow-through buying has the potential to lift spot prices beyond the $1,832-34 static hurdle, towards testing the $1,850 resistance zone.

Gold daily chart

Levels to watch