Gold Price Forecast: Acceptance above 21-DMA is critical for XAU/USD for additional recovery gains


  • Gold stages a decent comeback after finding strong bids under $1,900.
  • Hawkish Fed lifts mood, downs DXY, concerns over Russia-Ukraine talks loom
  • Daily technical setup turns in favor of bulls but recapturing 21-DMA is critical.

Gold price witnessed good two-way businesses on Wednesday, courtesy of the incoming updates on the Russia-Ukraine peace talks and the hawkish Fed decision. The yo-yo in risk sentiment aided the volatility around the yellow metal amid diplomacy on the Russia-Ukraine. The Financial Times (FT) reported, citing sources, Ukraine and Russia have made significant progress towards a potential 15-point peace plan if Kyiv declares neutrality and accepts limits on its military forces. The Independent, however, quickly reported that Ukraine rejected Russian claims that it was open to adopting a model of neutrality comparable to Sweden in peace talks.

Meanwhile, gold price resumed its downtrend and hit fresh two-week lows of $1,895 in an initial reaction the 25-bps Fed rate hike announcement and the dot plot showing six more hikes this year. In his press conference, Fed Chair Jerome Powell showcased confidence in the economy by pointing to more rate hikes and plans for balance sheet reduction, which lifted the Wall Street sentiment. The improved market mood weighed negatively on the US dollar while the Treasury yields extended their corrective pullback, helping gold rebound towards $1,930.

Gold price is building onto the previous rebound on Thursday, benefiting from the persistent weakness in the US dollar alongside the yields. The risk-on trading in the global stocks continues to dent the dollar’s safe-haven appeal, although investors remain cautious amid fresh concerns over the Russia-Ukraine peace talks. Ukrainian President Volodymyr Zelenskyy said early Thursday, “negotiations between Russia and Ukraine are challenging,” adding that “talks between Russia and Ukraine are still ongoing.” Adding to it, the French Foreign Minister also raised skepticism on the negotiations.

Meanwhile, mounting tensions over global economic growth keep gold price supported, central banks opt for aggressive tightening to curb raging inflation. Next of relevance remains the Bank of England (BOE) interest rate decision for fresh trading opportunities in gold price while mid-tier US economic data will be eyed as well. The geopolitical developments concerning the Ukraine crisis will remain the main market driver.

Gold Price Chart - Technical outlook

 

Gold: Daily chart

As observed on the daily chart, the tide seems to have turned in favor of bulls, as the 14-day Relative Strength Index (RSI) has recaptured the midline, currently sitting at 52.47.

The road to recovery, however, needs acceptance above the upward-sloping 21-Daily Moving Average (DMA) at $1,940 on a closing baiss.

Recapturing the latter will trigger a fresh upswing towards Monday’s high of $1,955, above which bulls will target the February 24 highs of $1,975.

On the flip side, if bears take out the daily lows of $1,923, then the correction from 19-month highs could resume, opening floors for a retest of $1,895. That level is the confluence of the previous day’s low and the rising trendline support.  

The additional declines will call for a test of the ascending 50-DMA at $1,873. Ahead of that, the February 24 lows of $1,878 will challenge the bullish commitments.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Gold keeps the bid bias unchanged near $2,700

Gold keeps the bid bias unchanged near $2,700

Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.

Gold News
Geopolitics back on the radar

Geopolitics back on the radar

Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.

Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures