Gold Price Forecast: XAU/USD climbs back to $1,800 mark, upside potential seems limited

• Gold regained positive traction on Monday and inched closer to the $1,800 mark.
• Concerns about the new COVID-19 variant benefitted the metal safe-haven status.
• Rebounding US bond yields revived the USD demand and capped any further gains.

Gold attracted fresh buying near the $1,780 support zone on the first day of a new week and maintained its bid tone through the early part of the European session. The XAU/USD was last seen hovering near the top end of its daily range, with bulls making a fresh attempt to conquer and build on the momentum beyond the $1,800 mark. Worries about the impact of the possibly vaccine-resistant Omicron coronavirus variant turned out to be a key factor that acted as a tailwind for the safe-haven precious metal.

Meanwhile, expectations that the emergence of a new variant could force the Fed to change its hawkish stance further benefitted the non-yielding yellow metal. Investors, however, preferred to wait and see if the new coronavirus variant would eventually derail the economic recovery. This was evident from the risk-on impulse, which, in turn, could hold back bulls from placing aggressive bets around gold. Apart from this, a stronger US dollar might further cap gains for the dollar-denominated commodity.

Receding safe-haven demand triggered a solid rebound in the US Treasury bond yields and helped revive the USD demand. This comes on the back of Friday's sharp pullback from the $1,815-16 region and makes it prudent to wait for a strong follow-through buying before positioning for any further intraday appreciating move. Hence, it remains to be seen if gold is able to capitalize on the move or meet with fresh supply at higher levels amid absent relevant market moving economic releases from the US.

Market participants now look forward to the US economic docket, featuring the only release of Pending Home Sales later during the early North American session. The data might do little to provide any impetus as the focus remains on developments surrounding the coronavirus saga. Traders will take cues from the broader market risk sentiment. Apart from this, the US bond yields will influence the USD price dynamics and further contribute to producing some short-term trading opportunities around gold.

Gold daily chart

Technical outlook

From a technical perspective, any subsequent move up is likely to confront immediate resistance near Friday’s swing high, around the $1,815-16 area. This is followed by the $1,822-23 hurdle, which if cleared decisively has the potential to lift gold prices back towards the $1,834 heavy supply zone. On the flip side, the $1,788-87 region now seems to protect the immediate downside ahead of the $1,780 horizontal support. A convincing break below will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent sharp pullback from the $1,877 area, or a multi-month top set on November 16.

Levels to watch