Gold Price Forecast: XAU/USD catches a safe-haven bid, $1,810 eyed

content provided with permission by FXStreet

  • Gold bulls taking on the counter-trendline resistance and eye the 38.2% Fibo near $1,810. 
  • Beyond $1,810, there is then air to $1,850 resistance. All eyes are on the central banks, EUR and greenback.
  • Safe havens are also in play considering the uncertainty surrounding covid variants. 

The price of gold is trading at $1,782 and higher by some 0.5% on the day after rising from a low of $1,772.30 and reaching a high of $1,794.62. The Fed’s decision to retire the term ‘transitory’ has failed to boost the greenback which is arguable overbought in terms of positioning. This has led to a bid in the commodities and has underpinned gold as a perfect hedge for inflation risks. 

Federal Reserve Jerome Powell, who testified to the Senate on Tuesday said, “we are actually at our next meeting in a couple of weeks going to have a discussion about accelerating that taper by a few months.” He also pledged to bury the term “transitory” and instead recommends Fed policymakers to consider explaining more clearly what the Fed thinks/means when it is talking about inflation.

”The decision helped to clarify that the Fed will look past the omicron threat, for the time being, reversing the shift in pricing catalyzed by the omicron variant in favour of an accelerated tapering process, which opens the door to a faster hiking cycle if necessary as markets had predicted,” analysts at TD Securities argued.

”Nonetheless, the threshold for another whipsaw for CTAs in gold is razor-thin. In fact, gold prices could surprise the hawks by looking to the upside, as CTA trend followers are set to cover their shorts in gold above $1785/oz,” the analysts added. 

Safe havens up, US dollar down 

Meanwhile, trades are also weighing what the new Omicron variant of the coronavirus might do to plans that Federal Reserve Chair Jerome Powell signalled on Tuesday to move more quickly to raise US interest rates. Safe havens are leading the way with the yen and CHF taking the top spot on the Currency Strength Indicator.

The euro is in third place as traders ponder as to whether the latest data will challenge the ECB’s ‘transitory’ story come to the December meeting? In doing so, the US dollar could be starting to lose its edge with regard to central bank divergence.  The dollar index DXY, which measures the greenback against major currencies was down on the day at 95.670 the low at one point, supporting gold prices.

Gold technical analysis

Meanwhile, however, the daily outlook is arguable bearish from a technical perspective. The price is retesting the counter trendline. If this holds, then the bias will be to the downside for the coming days. With that being said, a break back above the counter-trendline will leave prospects of a bullish continuation instead. 

Bulls will need to get above the 38.2% Fibonacci ratio resistance near $1,810 for a run to the neckline of the M-formation near $1,850 for the days ahead.