Gold Price Forecast: XAU/USD eases from five-month peak, retreats to sub-$1,800 levels

• Gold price corrects from a five-month high amid modest intraday US Dollar recovery move.
• Rebounding US Treasury bond yields revives the USD demand and weighs on the XAU/USD.
• Bets for less aggressive rate hikes by Federal Reserve should help limit losses for Gold price.

Gold price struggles to capitalize on the intraday positive move and retreats from the $1,810 area, or a five-month peak touched earlier this Monday. The XAU/USD slips below the $1,800 mark during the first half of the European session and is now flirting with a technically significant 200-day Simple Moving Average (SMA).

Modest US Dollar recovery exerts pressure on Gold price

The US Dollar reverses an early dip and stages a modest recovery from its lowest level since late June, which, in turn, is seen acting as a headwind for the Dollar-denominated Gold price. The upbeat monthly jobs report released from the United States on Friday and an upside surprise in wage growth pointed to the possibility of a further rise in inflationary pressures. This fuels speculation that the Federal Reserve will continue to tighten its monetary policy and offers some support to the Greenback.

Rebounding US Treasury bond yields further weighs on XAU/USD

Furthermore, Federal Reserve Chair Jerome Powell last week indicated that the peak interest rate will be higher than expected. This leads to an intraday uptick in the US Treasury bond yields, which is seen as another factor benefitting the US Dollar and driving flows away from the non-yielding Gold price. Apart from this, the latest optimism over the easing of COVID-19 restrictions in several Chinese cities dents demand for traditional safe-haven assets and further seems to weigh on the XAU/USD.

Bets for smaller rate hikes by Federal Reserve to limit losses

The downside, however, is likely to remain cushioned, at least for the time being, amid rising bets for a relatively smaller 50 bps rate hike by the Federal Reserve at its upcoming meeting on December 13-14. This should continue to lend some support to Gold price, warranting some caution positioning for any meaningful corrective pullback. Traders now look forward to the US ISM Services PMI, due for release later during the early North American session, for short-term opportunities.

Gold price technical outlook

From a technical perspective, last week’s sustained move beyond the very important 200-day SMA was seen as a fresh trigger for bullish traders. Hence, any subsequent decline is more likely to attract some buyers near the $1,783-$1,782 region. This, in turn, should help limit the downside for Gold price near the $1,761-$1,760 horizontal resistance breakpoint, now turned support.

On the flip side, bulls might now wait for some follow-through buying beyond the $1,810 area before placing fresh bets. Gold price might then accelerate the positive momentum towards testing the next relevant hurdle near the $1,830 zone en route to the $1,843-$1,845 supply zone.

Key levels to watch