Gold Price Forecast: XAU/USD struggles to capitalize on intraday gains beyond $1,800

• XAU/USD extends the previous session’s gains on Monday near  $1,800.
• Gold posts the gains for the fifth straight session.
• Lower US Treasury yields undermine the demand for the US dollar.

Update: Gold held on to its modest intraday gains through the early European session, albeit lacked any follow-through and remained capped near the $1,800 round figure. The uptick was sponsored by a softer tone surrounding the US dollar, which tends to benefit the dollar-denominated commodity. That said, a combination of factors held bulls from placing aggressive bets and kept a lid on any further gains for the XAU/USD, at least for the time being.

The Fed Chair Jerome Powell reaffirmed on Friday that the US central bank remains on track to begin tapering its asset purchases soon. This, along with rising bets for an interest rate hike move in 2022, acted as a tailwind for elevated US Treasury bond yields and capped the upside for the non-yielding gold. Apart from this, the dominant risk-on mood in the markets was seen as another factor that could undermine the safe-haven precious metal.

From a technical perspective, acceptance above the 100/200-day SMAs confluence favours bullish traders and supports prospects for additional gains. That said, Friday's intraday pullback from six-week tops warrants some caution for bullish traders. This further makes it prudent to wait for a strong follow-through selling before positioning for any further appreciating move amid absent relevant market-moving economic releases on the first day of the week.

Previous update: Gold trades with gains on Monday, extending the previous week’s upside momentum. The US benchmark 10-year Treasury yields trade below 1.65%, with 0.78% losses, enhancing non-yielding bullion’s appeal.

The US Dollar Index, which tracks the performance of the greenback against the basket of six major currencies, books fresh losses below 93.50 with 0.15% losses, making gold attractive for the other currencies holders. The greenback weighed down as investors digested the relative pace of interest rate hikes expectations from the major central banks.

The global stock market remained edgy amidst a deterioration in the investor risk sentiment linked to comments made by Fed’s Chairman Jerome Powell. He reiterated his outlook that the US central bank is on confirmed track to reduce its monthly asset purchase before the end of the year. Further, he added that the monthly purchases are expected to end by mid-2022.

The precious metal rallied to its highest level since early September above $1,800 on Friday before trimming gains, following Fed’s chairman Powell’s statement on the timing of interest rates hike, especially given the current labor market conditions. US Treasury Secretary Janet Yellen remained on the same line on inflation, as she said the US is in control of inflation, and it could return to normal by the second half of next year.

As per the US Commodity Futures Trading Commission's data released on Friday, traders cut their net long positions in gold in the week to October,19.
 
Technical levels

XAU/USD daily chart

On the daily chart, XAU/USD rose for fifth consecutive session after forming a Doji candlestick on October,18. The prices crossed above the 200-day Simple Moving Average (SMA) at $1,793.43 for the first time since early September. The prices moved in the upward channel from the lows of $1,722.31 made on September 30, indicating the current underlying bullish current.

The Moving Average Convergence Divergence (MACD) holds above the midline with a bullish crossover. Any uptick in the MACD indicator would amplify the buying pressure and the prices would approach the $1,810 horizontal resistance level . A daily close above the mentioned level would encourage bulls to retest the high made on September, 7 at $1,827.32. XAU/USD bulls could meet the upper trendline of the upward channel at $1,840 as the next upside target.

Alternatively, if the prices break below the 200-day SMA, it could retrace back to the $1,780 horizontal support level. Furthermore, a successful break of the bullish sloping line could mean more downside for gold toward the $1,765 horizontal support level, followed by the October, 12 low at $1,750.81.

XAU/USD additional levels