Gold Price Forecast: XAU/USD struggles to break above the 20-day SMA

XAU/USD Current price: $1,961.14

• The US Dollar recovers some ground following US data but remains vulnerable.
• XAU/USD fails to hold above $1,970 and erases daily gains.
• The outlook suggests another test of $1,975 as the Dollar is not out of the woods yet.

Spot Gold experienced a pullback on Wednesday after reaching a weekly high at $1,975. XAU/USD struggled to hold above $1,970, primarily due to a correction in the US Dollar and a rebound in US yields. However, the outlook suggests that the path of least resistance in the short term remains to the upside.

In terms of US economic data, the Producer Price Index (PPI) declined by 0.5% in October, contrary to expectations of a 0.1% increase. The annual rate also dropped from 2.2% to 1.3%. Additionally, the Core PPI showed lower-than-expected figures. These readings align with the Consumer Price Index (CPI) data released on Tuesday, indicating a cooling of inflation. Retail Sales declined by 0.1% in October, against expectations of a steeper slide of 0.3%.

The economic focus reinforces the evidence that pushed the US Dollar lower on Tuesday, although its impact on Wednesday was different, likely due to a correction. Risk appetite remains present, US bonds are firm, and the vulnerability of the Greenback persists, all of which could support further gains in Gold.

On Thursday, the US will release the weekly Jobless Claims report, Industrial Production, and the Philly Fed Manufacturing Index. Positive numbers could weaken demand for Treasury bonds, leading to higher yields, which could weigh on Gold.

XAU/USD short-term technical outlook

Gold is facing resistance around the 20-day Simple Moving Average (SMA) at $1,973, and the bulls need a decisive break above this level to pave the way for further gains. As long as the price remains below this level, the uptrend appears unstable. On the downside, the daily chart indicates an important support level around $1,950. Below that, between $1,935 and $1,925, the 55-day, 100-day, and 200-day SMAs are positioned to provide support. A breakout below that range would signal further weakness and a potential test of $1,900.

On the 4-hour chart, XAU/USD remains above the 20-period SMA, suggesting some upside potential. However, technical indicators offer mixed signals. The Relative Strength Index (RSI) is trending downward, Momentum is flattening, and the MACD shows limited potential. A breakdown below $1,955 would leave Gold vulnerable in the short-term. A breakout above $1,971 would expose the key resistance at $1,975; once above that level, XAU/USD has further room to rally.

Support levels: $1,956 $1,942 $1,933

Resistance levels: $1,975 $1,982 $1,991 

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