Gold Price Forecast: XAU/USD slides back closer to $1,750 level, fresh session lows
- Gold witnessed some selling on Tuesday and snapped three days of the winning streak.
- The risk-on impulse, an uptick in the US bond yields, stronger USD all exerted pressure.
- A combination of factors might help limit the downside ahead of Friday’s US NFP report.
- Gold Price Forecast: XAU/USD awaits acceptance below $1750 to resume the downside
Gold came under some renewed selling pressure on Tuesday and snapped three consecutive days of the winning streak to one-and-half-week tops. The intraday decline extended through the early North American session and dragged the XAU/USD to fresh daily lows, closer to the $1,750 level in the last hour.
Following the recent pullback from one-year tops, the US dollar was back in demand and continued drawing support from prospects for an early policy tightening by the Fed. Investors seem convinced that the Fed would begin rolling back its massive pandemic-era stimulus as soon as November. The markets might have also started pricing in the possibility of an interest rate hike in 2022. A stronger dollar, in turn, was seen as a key factor that acted as a headwind for dollar-denominated commodities, including gold.
The greenback was further underpinned by a fresh leg up in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond shot back above the 1.50% threshold, which was seen as another factor that drove flows away from the non-yielding yellow metal. Apart from this, a solid rebound in the equity markets further dented demand for traditional safe-haven assets, like gold, and contributed to the ongoing corrective pullback.
That said, a combination of factors might hold traders from placing aggressive bearish bets and help limit deeper losses for gold, at least for the time being. Worries that the continued surge in crude oil/energy prices will stoke inflation and derail the global economic recovery might keep a lid on the optimism. Adding to this, fragile US-China trade ties, China Evergrande’s debt crisis and a stalemate over the US debt ceiling could lend some support to the safe-haven XAU/USD.
Moreover, investors might also refrain from placing aggressive bets, rather prefer to wait for this week's key release of the US monthly jobs data on Friday. The closely watched NFP report should provide fresh clues about the likely timing of the Fed's tapering plan and allow investors to determine the next leg of a directional move for gold. This makes it prudent to wait for a strong follow-through selling before confirming that the recent bounce from the $1,722-21 area or the lowest level since August 10 has run out of steam.
Technical levels to watch
Some follow-through selling below the $1,750 level will set the stage for a slide towards the $1,729 intermediate support en-route September monthly swing lows, around the $1,722-21 region. Failure to defend the mentioned support levels will turn gold vulnerable to accelerate the downward trajectory towards challenging the $1,700 round-figure mark.
On the flip side, the $1,770 area, or one-and-half-week tops touched on Monday, now seems to have emerged as an immediate resistance ahead of the $1,774-75 region. The next relevant hurdle is pegged near the $1,783-84 area, above which bulls are likely to aim back to reclaim the $1,800 round-figure mark. The latter coincides with the very important 200-day SMA and should act as a key pivotal point for short-term traders.