Gold Price Forecast: Uptick might still be seen as an opportunity for XAU/USD bears

• Gold consolidated its recent slide to multi-month lows and remained confined in a range on Friday.
• The passage of the US stimulus bill, attacks on Saudi Arabian oil facilities extended some support.
• The lack of any strong follow-through buying suggests that the downtrend is still far from being over.

Gold lacked any firm directional bias on Friday and seesawed between tepid gains/minor losses, consolidating its recent losses to nine-month lows. The US dollar got a strong lift after Fed Chair Jerome Powell on Thursday dismissed concerns about the recent sharp rise in long-term yields. The already stronger got an additional boost following the release of the upbeat US monthly jobs report, which, in turn, was seen as a key factor that weighed on the dollar-denominated commodity.

The headline NFP showed that the US economy added 379K jobs in February. Adding to this, the previous month’s reading was also revised higher to 166K from 49K reported earlier and the unemployment rate edged lower to 6.2% from 6.3% previous. The data reinforced the narrative of strong sequential recovery and pushed the yield on the benchmark 10-year US government bond above 1.60%, or fresh over one-year tops. This was seen as another factor that undermined the non-yielding yellow metal.

Despite the negative factors, investors seemed reluctant to place fresh bearish bets amid near-term oversold conditions. Nevertheless, the commodity recorded the third consecutive week of losses but managed to regain some positive traction on the first day of a new trading week. The passage of US President Joe Biden’s $1.9 trillion pandemic aid package, along with reports of attacks on Saudi Arabian oil production facilities extended some support to the safe-haven XAU/USD.

In fact, the US Senate on Saturday voted 50-49 in favour of a massive US fiscal spending bill, with some changes related to the increase in the minimum wage and the number of people who will qualify for a $1,400 stimulus payment. The legislation now moves back to the House for a vote on Tuesday. That said, the uptick lacked any follow-through buying, suggesting that the near-term bearish pressure might still be far from being over and warranting some caution for aggressive bullish traders.

In the absence of any major market-moving economic releases from the US, the broader market risk sentiment will play a key role in driving the XAU/USD. Apart from this, the US bond yields will influence the USD price dynamics and produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the commodity managed to find some support near the lower boundary of a two-month-old descending trend-channel. The uptick could be solely attributed to some short-covering, which runs the risk of fizzling out rather quickly. Hence, any further recovery towards the $1722-23 region would still be seen as a selling opportunity. This, in turn, should cap the upside near the $1740 heavy supply zone. That said, a sustained move beyond has the potential to push the metal back towards an important $1760-65 strong support breakpoint, now turned resistance.

On the flip side, the trend-channel support, around the $1690-88 region, might continue to protect the immediate downside. A sustained breakthrough will be seen as a fresh trigger for bearish trades and turn the commodity vulnerable to accelerate the fall towards the $1670 horizontal support. Some follow-through selling should pave the way for a further near-term depreciating move towards the next major support near the $1620-15 region.