Gold Price Forecast: XAU/USD bears the burden of firmer United States Treasury bond yields

• Gold price stays pressured towards 21-Daily Moving Average after snapping two-day winning streak.
• United States Treasury bond yields renew multi-day high as optimism surrounding China propels inflation fears.
• US Dollar regains upside momentum but Gold price remains depressed despite holiday season.

Gold price (XAU/USD) remains defensive around $1,805, after printing the first daily negative closing in three, as bears struggle to retake control amid the lackluster holiday season. In doing so, the yellow metal portrays the market’s fresh fears of inflation, emanating from China, as well as geopolitical tension surrounding Russia and Ukraine, which in turn propel US Treasury bond yields and the US Dollar. However, the lack of major data/events joins the strong presence of the 21-Daily Moving Average (DMA) support to challenge the precious metal’s immediate downside.

Gold bears sense negatives from China unlock

China’s almost total repeal of the “Zero-Covid” policy initially triggered the market’s optimism before Gold traders feared the negative outcomes, especially in the form of rising inflation due to the dragon nation’s push for a faster reversal of the lost economic momentum during COVID-19. On Wednesday, China's Civil Aviation Authority stated that they will gradually start taking applications from domestic and foreign airlines for international passenger charter flights.

Other than the inflation fears, the doubts over the official virus numbers pushed some of the major economies, including the US to announce restrictive measures for Chinese travelers. Recently, the US Health Official mentioned, “Beginning January 5, all passengers from China aged 2 and up will be required to undergo a Covid test two days before departure.” Previously, India, Japan, Taiwan and Italy announced requirements for COVID tests for visitors from China.

Also teasing the Gold sellers was news from Reuters suggesting inconsistent virus details from Beijing. “China reported three new COVID-related deaths for Tuesday, up from one for Monday - numbers that are inconsistent with what funeral parlors are reporting, as well as with the experience of much less populous countries after they re-opened,” reported Reuters.

Hence, fears surrounding China, one of the world’s biggest Gold consumers weigh on the metal prices despite the Asian major’s attempt to please markets.

Geopolitical fears add strength to the XAU/USD weakness

Not only China, but geopolitical concerns surrounding Russia and Ukraine also exert downside pressure on the Gold price. As per the latest updates from Ukrainian Military, per Reuters, “Russian forces increased mortar and artillery attacks on the city of Kherson more than six weeks after it was retaken by Ukrainian troops, while also exerting pressure along frontlines in the east.” In this regard, Russia previously stated that the only agreements that account for the four additional territories joining Russia are feasible.

Market fears propel yields, US Dollar and weigh on the Gold price

Given the virus woes and a likely run-up in inflation fueling the recession woes, the US Treasury bond yields refresh a multi-day high and enable the US Dollar to pare recent losses. That said, the US 10-year Treasury yields rose to the highest levels since November 14 while flashing 3.88% by the end of Thursday whereas the US Dollar Index (DXY) rose for the second consecutive day to 104.50 at the latest. It should be noted that the key US bond coupon, namely the 10-year Treasury bond yields, marked the biggest one-day rise since October 19 on Wednesday.

Light calendar to challenge XAU/USD moves

Although the fresh run-up in the US Treasury yields weighs on the Gold price, a lack of major data and events could probe the metal’s moves during the holiday season. Even so, the XAU/USD bears are likely to keep the reins.

Gold price technical analysis

Gold price justifies multiple failures to cross upward-sloping resistance lines from early September and October, respectively near $1,835 and $1,848, to retreat towards the 21-Daily Moving Average (DMA) retest, around $1,795 by the press time.

Adding strength to the bearish bias over the Gold price momentum are the downbeat signals from the Moving Average Convergence and Divergence (MACD) indicator, as well as the steady Relative Strength Index (RSI), located at 14.

Even so, the metal’s downside past $1,795 appears limited as the 618% Fibonacci retracement level of the June-September south-run, near $1,778, precedes the 50% Fibonacci retracement level of around $1,747 to challenge XAU/USD bears.

In a case where Gold sellers manage to keep the reins past $1,747, a southward trajectory towards the late November swing low near $1,721 can’t be ruled out.

Alternatively, an upward-sloping resistance line from September, close to $1,835 by the press time, restricts immediate advances of the XAU/USD before the ascending trend line resistance line from October, around $1,848, to restrict the short-term upside of the Gold price.

Should the Gold price remains firmer past $1,848, June’s top near $1,880 and the $1,900 round figure should return to the charts.

Overall, the Gold price remains firmer unless breaking the 21-DMA support even if the XAU/USD bulls appear to run out of steam.

Gold price: Daily chart

Trend: Limited downside expected