Gold Price Forecast: XAU/USD remains confined in a range below $1,780 level

Update: Gold continued with its struggle to build on this week's modest gains and has been oscillating in a range over the past three trading sessions. Currently trading below the $1,780 level, the prevalent risk-on mood was seen as a key factor that acted as a headwind for the safe-haven gold. Apart from this, a modest pickup in the US Treasury bond yields further collaborated to cap the upside for the non-yielding gold. That said, a softer tone surrounding the US dollar extended some support to the dollar-denominated commodity and helped limit the downside.

In fact, the key USD Index trimmed a part of last week's hawkish FOMC-inspired strong gains to the highest level since April 9 amid mixed signals on the US inflation. The Fed Chair Jerome Powell said on Tuesday that inflation is rising due to pent-up demand and supply bottlenecks and that the price pressures should ease on their own. Separately, Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman said that the high inflation in the US would last longer than expected, though agreed that the price increase will prove temporary.

The combination of diverging forces held investors from placing any aggressive bets and led to a subdued/range-bound price action through the first half of the trading action on Thursday. Market participants now look forward to a slew of important US macro data for a fresh impetus later during the early North American session. This, along with the US bond yields and a scheduled speech by New York Fed President John Williams, will influence the USD price dynamics and produce some short-term trading opportunities around the XAU/USD.

Previous update: Gold (XAU/USD) portrays the market’s indecision with a 0.23% intraday loss near $1,773, despite recently bouncing off the day’s low, heading into Thursday’s European session. Chatters over the Fedspeak and US President Joe Biden’s infrastructure spending plan are all around whereas the fears of the Delta Plus covid variant also favor the gold sellers. Though, a lack of clear direction and a light calendar keeps traders waiting for the fresh catalyst to have a better view of the markets.

After Fed Chair Jerome Powell’s reaffirmation that the inflation risks are transitory, posing no major challenge to the Fed’s current policy, President and CEO of the Federal Reserve Bank of Boston Eric Rosengren expects, “most price increases will be reversed going into next year.” On the same line were comments from US Treasury Secretary Janet Yellen saying, “Most measures of inflation expectations remain well-anchored.”

On the contrary, Atlanta Federal Reserve President Raphael Bostic and Dallas Fed President Robert Kaplan stayed hawkish over the Fed’s next moves but got fewer accolades.

Meanwhile, US Senators are in a rush to pass President Joe Biden’s infrastructure spending bill ahead of a two-week holiday period but a vast difference prevails between the Democrats’ push and Republicans’ demands. Hence, the deadlock weighs the market sentiment and puts a bid under the US dollar.

It’s worth noting that China’s warning to the US over having warships in the Taiwan Straits didn’t stop the Biden administration from restricting exports to five companies from Beijing, adding to the risk-off mood. Furthermore, fears of the covid variant regain traction in the US as an Epidemiologist warns over the jump in the cases in this fall. The Delta Plus variant of the coronavirus (COVID-19) recently pushed back the UK’s unlock deadline and is the key concern for the British government amid the latest 41% jump in daily cases.

Given the lack of major data/events, gold traders seek fresh clues from the US Durable Goods Orders for May, expected 2.7% versus -1.3% prior. In addition to that, headlines concerning the virus and US stimulus, coupled with the Sino-American tussles, can also offer a strong guide to gold prices.

Technical analysis

Gold prices justify Wednesday’s bearish Doji below 100-day SMA (DMA) to aim for four-month-old horizontal support near $1,960. However, any further weakness needs a daily closing below $1,755, comprising the mid-March tops, to keep sellers hopeful.

Should the quote stays pressured below $1,755, April 13 low near $1,745 and the $1,700 threshold may act as intermediate halts during the south-run to the yearly low surrounding $1,675.

Meanwhile, an upside clearance of 100-DMA, around $1,793, will seek validation from the $1,800 round-figure before targeting the early May’s swing high near $1,845.

Though, gold’s upside past $1,845 will have a bumpy road that starts with $1,855 and ends on the commodity’s daily close beyond $1,910.

To sum up, gold sellers do firm the reins but aren’t in full control and hence need fresh catalysts to portray a decisive move.

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