Gold Price Forecast: Defending this key support is critical for XAU/USD bulls, as $1900 beckons

• Gold price looks north towards $1900 if the key support holds.
• Treasury yields remain depressed, keep the US dollar undermined.
• US Markit PMIs eyed for the next trading impetus.

Gold price (XAU/USD) extended its choppy trend into the second straight session on Thursday, although remained within a familiar range below the three-month highs of $1890. As the effect of the FOMC minutes faded, gold climbed back northwards and hit a daily high of $1884. Sellers reclaimed ground and pushed gold price lower towards $1870 in the North American session, as the Wall Street stocks recovered from the crypto crash led broader market sell-off. The downturn in gold, however, remained capped by the persistent weakness in the US dollar and the Treasury yields, as markets overlooked the Fed’s tapering jitters amid risk recovery. Upbeat US Jobless Claims data added to the optimism over a faster economic recovery.

The sentiment around gold price remains underpinned by the continued rise in gold exchange-traded funds inflows and a bearish consolidation in the US dollar alongside yields. Rising inflation expectations also keep the inflation-hedge gold somewhat buoyed. So far this Friday, the risk sentiment remains tepid amid stabilizing crypto markets and renewed covid concerns, which helps gold price to recover towards $1880. Later in the day, the US Markit Manufacturing and Services PMIs will be closely watched for fresh hints on the economic activity, impacting the market mood and the dollar’s price action.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold price’s four-hour chart shows that the bulls are defending the weekly rising trendline support at $1871, which also coincides with the 21-simple moving average (SMA).

A four-hourly candlestick closing below the latter could negate the bullish potential in the near term, opening floors for a test of the 50-SMA at $1850.

The next powerful support is seen at $1823, where the 100-SMA aligns.

However, with the Relative Strength Index (RSI) trending above the midline on a sustained basis and even pointing north, the odds are higher for the gold price to hold onto the abovementioned critical support.

Any bounce could meet initial resistance at Thursday’s high of $1884, above which the multi-month tops of $1890 could come into play.

A decisive break above $1900 is needed to extend the recent upbeat momentum towards the January 8 high of $1918.