Gold Price Forecast: XAU/USD remains vulnerable near $1,750 as USD rebounds

• Gold fails to maintain the previous day’s upside momentum on Tuesday.
• Higher US Treasury yields underpins the demand for the US dollar
• Inflation concerns support  prices near lower levels.

Gold prices surrendered the initial gains as the US dollar gathered momentum on Tuesday. The prices encounter strong resistance near $1,770. The US Dollar Index, which tracks the performance of the greenback against the basket of six major currencies, recovers from the lower levels and stands strong near 94.00 ,making the precious metal cheaper for other currencies holders. The greenback came under selling pressure after touching the yearly high above 94.00 in the previous week.

The US New Factory Orders came above the forecasts as it jumped 1.2% in August, much above the market forecasts of a 1% rise. The upside pressure in the prices were built up by the higher US 10-year benchmark Treasury yields, which rose 2 basis points to 1.48% after testing the high of 1.56%, its highest point since June. Investors remained concerned about inflationary pressures and tighter monetary policy. Now,the main focus for traders turns toward this week ADP’s September employment change data on Wednesday and the Nonfarm payrolls (NFP) report for the previous month, which is due on Friday. 

Gold is generally considered as a hedge against inflation and currency volatility. A Hawkish move by the Federal Reserve would diminish gold’s appeal. If the Fed raises interest rates this would increase the opportunity cost of holding the bullions, which pays no interest.

Asian stock market remains cautious on the fate of the debt-ridden China’s Everngradne and its ripple effect on the global stock market, supporting the gold prices near the lower levels.

 
Technical levels

XAU/USD daily chart

Gold prices formed the double top near $1830 on the beginning of the September series and remained under the selling pressure for the complete month while touching the low near $1,721.71 on September 29. The prices bounced back from here on to touch the highs near $1,770 where once again selling pressure dominates the trend. The bearish sloping line from the $1,830 acts as a strong resistance for the bulls. In addition to that, the price slips below the 21-day Simple Moving Average (SMA) at $1,767.

Having said that, as per the technical set up the first downside target for XAU/USD appears at the previous day’s low of $1,747.79.

The Moving Average Convergence Divergence (MACD) holds onto the oversold zone. Any downtick in the MACD indicator would confirm amplify the selling pressure  and the prices would approach toward the $1,730 horizontal support level. A daily close below the support level would entice bears to meet the $1,710 horizontal support level.

Alternatively, if the prices sustain intraday high, it could retrace back to the $1,785 horizontal resistance level followed by the high made on September 16 at $1,796.20. A daily close above the 20-day SMA would mean the $1,810 horizontal resistance level for XAU/USD.

XAU/USD additional levels