Gold Price Forecast: Bears are seeking a break of $1,790 support

• Gold is a mix of geopolitics, the Fed and Omricon risks.
• Bears are looking for a break of $1,790 for a run to $1,770.

At $1,796, gold is flat for the day despite geopolitical risks back into the limelight, the US yields touching a two-year high and stocks looking into the abyss.

Gold remains in familiar ranges between $1,790.43 and $1,802.37. Traders are balancing an accelerated tapering at the Federal Reserve, which should also give officials the option of raising rates as soon as March, and the acceleration of omicron infections around the world.

Barely a month after its detection in southern Africa, the new Omricon COVID-19 variant was already dominant in countries around the world, with more cases than ever before, potentially making it the fastest spreading studied virus in history.

“It is the most explosive and the fastest-spreading virus in history,” a historian and physician, Anton Erkoreka, who is the director of the Basque Museum of the History of Medicine, said. 

However, uncertainty remains over whether it is less serious for unvaccinated people and the immunocompromised. Nevertheless, even with fewer people getting really sick, hospitals are still strained. 

Dr. Anthony Fauci, the US top infectious disease expert, recently told ABC News that the country is seeing "almost a vertical increase" in cases and that even a relatively lower rate of hospitalizations could strain already overwhelmed hospitals.

"We have got to be careful about that, because, even if you have a less of a percentage of severity, when you have multi-multi-multi-fold more people getting infected, the net amount is you're still going to get a lot of people that are going to be needing hospitalization," Fauci explained. "And that's the reason why we're concerned about stressing and straining the hospital system." 

The same can be said for other market-relevant nations around the world that is likely a weight for global equities and a positive for gold as a safe haven for the foreseeing future. 

Meanwhile, as analysts at TD securities explained, Investors had a mixed response to recent hawkish statements from the Federal Reserve and the acceleration of omicron infections around the world. 

''On the one hand,'' the analysts said, ''the ever-louder hawkish tone from the Fed has prompted money managers to aggressively reduce long gold exposure, while on the other hand, concerns that a global slowdown due to covid in early-2022 may reduce pressure on central banks to introduce more restrictive policy.''

The latest data from the US, however, suggest that the Fed could be too hawkish in their forecasts. The Nonfarm Payrolls data showed that job growth in the US continues to slow and is now at an 11-month low. The Us dollar responded in kind by sliding in the aftermath of the report. However,  it is attempting to recover. 

''The fall in the unemployment rate and rise in earnings show inflationary pressures are building rapidly in the labour market,'' analysts at ANZ Bank said at the start of the week, nothing that this is consistent with the Fed tightening "relatively soon". Moreover, the analysts noted that ''Nonfarm Payrolls are still 3.6m shy of the pre-pandemic high, but due to a lack of supply, rather than demand, and that’s only adding to underlying inflation pressures.

Nevertheless, gold has moved slightly higher following the December payrolls report, even as wage inflation was higher-than-expected, which analysts at TD Securities suggest there may be more short-covering to come.

''The ever-louder hawkish tone from the Fed has prompted money managers to aggressively reduce long gold exposure, while on the other hand, concerns that a global slowdown due to covid in early-2022 may reduce pressure on central banks to introduce more restrictive policy and the likely hedging of risk drove specs to cover shorts in a robust way,'' the analysts said in reference to the latest CFTC positioning data. 

The analysts argued in a note today that ''central banks will continue to buy gold, while investors are looking to diversify given a higher perceived risk of equity market volatility, suggesting that gold speculators' relative short positioning may still drive the yellow metal into the $1,850s/oz in the early months of 2022.''

In the same vein, US stocks have slumped at the start of this week, extending declines from last. The velocity of a recent surge in government bond yields unnerved investors.

The Nasdaq Composite has been leading the way and has sank to a low of 15,165.53 today. The index is currently down 1.6% but of its lows. The S&P 500 was down 1.2% and the Dow Jones Industrial Average is 1% lower at the time of writing, with both index also recovering from their lows of the day. All sectors were in the red on an intraday basis. Meanwhile, The 10-year US Treasury yield rose to 1.808% intraday, touching its highest intraday level since January 2020. The 10-year yield, which ended last year at 1.52%, surged to about 1.76% by the end of last week, a 24 basis-point jump in just five days.

Gold could be supported on geopolitical risks 

Meanwhile, Kazakhstan is a risk for the commodity complex. The central Asian country is the world's biggest uranium exporter and is among the top oil and coal producers. The resource-rich state has seen some of the biggest public protests in years, unnerving energy amongst other commodity markets.

Days of unrest — set-off initially by a rise in fuel prices and eventually turning into an uprising against corruption and nepotism — prompted President Kassym-Jomart Tokayev to declare a state of emergency.  

The demonstrations and the subsequent crackdown in the world's top uranium exporter and a major oil and gas producer have left investors anxious which could help support gold as a safe haven.

Gold technical analysis

There is a downside bias on the daily chart as per the head and shoulders taking shape.

A break and retest of $1,790 4-hour support structure would be expected to lead to a downside continuation putting $1,770 on the map: