Gold Price Forecast: XAU/USD hits fresh monthly high, eyeing $1,815 barrier amid risk-off

• Gold refreshes monthly top, recently taking bids despite risk-off mood.
• Yields react to central bank actions, fears of delayed Fed rate hike despite firmer dot-plot.
• India proposes a cut in gold import duty to 4.0% from 7.5%.
• Virus updates, geopolitics in focus amid a light calendar to end the busy week.

Update: Gold built on its post-FOMC strong recovery from the $1,753 area, or over two-month low and continued gaining traction for the third successive day on Friday. The momentum extended through the early North American session and pushed spot prices to a fresh monthly high, around the $1,8113 region in the last hour.

As investors looked past this week's hawkish central bank decisions, the prevalent cautious mood was seen as a key factor that benefitted the safe-haven gold. Worries about the economic risks emerging from the rapid spread of the Omicron coronavirus variant continued weighing on investors' sentiment. This was evident from a generally weaker trading sentiment around the equity markets.

The flight to safety triggered a fresh leg down in the US Treasury bond yields, which kept the US dollar bulls on the defensive and further underpinned the non-yielding yellow metal. Apart from this, the momentum could also be attributed to some technical buying on a sustained move beyond the 200/100-day SMAs confluence and the $1,800 round figure. With the latest leg up, gold has rallied around $60 from the low touched on Wednesday and seems all set to end the week on a positive note.

Previous update: Gold (XAU/USD) takes the bids to refresh the monthly high near $1,807, up 0.40% intraday to brace for the biggest weekly jump in six during early Friday morning in Europe.

The bullion prices cheer downbeat US Treasury yields and price-positive news from the biggest gold customer India. Also favoring gold buyers are the futures market data suggesting a delay in the Fed’s interest rate hike than what’s promised in the latest dot-plot.

That said, the US Treasury yields drop for the second consecutive day and weigh the US Dollar Index (DXY), down 0.05% on a day near 95.85.

Reuters shares the Indian Trade Ministry update, via NewsRise, suggesting the government’s proposal to cut basic import duty on gold from 7.5% to 4.0%.

On the other hand, the Financial Times (FT) came out with the analytical piece while quoting the futures data that hints at the market’s bets on a delayed lift in the US Fed rate. “Trading in futures markets, which offers insight into how investors are positioning for changes to Fed interest rate policy in the years ahead, showed that money managers expected the US central bank’s overnight rate to rise to just 1.27% by the end of 2023,” per the FT. The piece adds, “That was a full 0.11 percentage points below the 1.38% implied on Wednesday, and compared to Fed policymaker’s projections for 1.6% released yesterday.”

It should be noted that spreading fears of the South African covid variant, dubbed as Omicron, joins the fresh US-China tussles over Xinjiang-related issues and the US-Iran tension to weigh on the market sentiment amid a sluggish session.

Gold prices crossed the key 200-DMA the previous day after the DXY reacted to the European Central Bank (ECB) meeting, with the biggest daily fall in December. The reason could also be linked to the downbeat Treasury yields amid the market’s rush for the US bonds and mixed feelings over the US Federal Reserve’s (Fed) hawkish action.

Moving on, gold remains on the front foot amid the USD’s weakness and may continue advancing amid a lack of major data/events to end the busy week.

Technical analysis

Resistance to provide a daily closing below an ascending support line from August joins a sustained break of the 200-DMA and improving MACD, as well as RSI conditions to favor gold buyers above the $1,800 threshold.

That said, the metal pierces a 38.2% Fibonacci retracement (Fibo.) level of August-November upside to add strength to the bullish bias.

As a result, gold prices are on the way to tops marked in October and late November surrounding $1,815, a break of which will highlight the $1,834 level comprising the July and September highs.

Meanwhile, a downside break of the 200-DMA level of $1,795 will direct the bears to the aforementioned trend line support, near $1,770.

A daily closing below $1,770, however, will direct the gold bears to $1,750 before knocking the September low near $1,721 and then to the $1,700 round figure.

Gold: Daily chart

Trend: Further advances expected