Gold Price Forecast: Can XAUUSD extend beyond 21-DMA amid firmer yields?

Gold Price rose to a new six-day high of $1,849 on Friday, ending the week in the green for the first time in five. Friday’s advance was a continuation of the metal’s recovery from four-month lows of $1,787 reached last Monday. The US dollar’s correction from two-decade highs was the main catalyst behind XAUUSD’s renewed upside, although inverse relationship between gold and the US Treasury yields was back in the works, which mainly influenced the bright metal’s price moves in the previous week.

On Friday, particularly, a flight to safety theme remained in play, which boosted the demand for safe havens such as the dollar and the US government bonds. Therefore, the US rates suffered and provided extra legs to gold’s recovery. Also, what helped the dollar was the tech sell-off on Wall Street, as investors continued to fret about rising borrowing costs and their impact on global growth, with major central banks now on a tightening cycle.

The new week saw a solid opening in Asia, as risk rebounded sharply and investors continued betting against the dollar. Gold Price, therefore, hit one-week highs at $1,858, as markets cheered a likely Chinese economic rebound amid a gradual end to the covid restrictions. The optimism, however, cooled off a bit, as tech stocks tumbled on Chinese indices while Beijing registered record covid cases. Markets also continue to assess the impact of higher interest rates on global growth. Gold’s upside appears capped, as the Treasury yields stage a decent comeback.

Looking forward, the German IFO Business Survey could help calm tensions surrounding economic slowdown while the US docket lacks any top-tier macro release this week, making for a quiet start to the Fed minutes week.

Gold Price Chart: Daily chart

A bullish break from the descending trendline resistance at $1,808 confirmed Thursday has powered gold bulls, as they look to scale the 21-Daily Moving Average (DMA) hurdle at $1,859 on a sustained basis.

Daily closing above the latter is needed to confirm a bullish reversal, exposing the additional upside towards the horizontal 100-DMA at $1,885.

Ahead of that the $1,870 round figure could challenge the bearish commitments.

The 14-day Relative Strength Index (RSI) is closing in on the midline, looking to recapture it. This suggests that bulls could await confirmation before resuming the recovery mode.

Alternatively, the immediate support is seen at the flattish 200-DMA at $1,838. If sellers manage to find a strong foothold below the latter, then a steep drop towards the $1,800 demand area cannot be ruled out.

The additional declines could test strong support at $1,787, the confluence of the multi-moth lows and the descending trendline support.