Gold Price Analysis: XAU/USD traders eye critical resistance

• Gold is meeting a critical monthly resistance. 
• Chart of the Week: Gold bears lurking at monthly resistance.

• Gold Weekly Forecast: XAU/USD could stage a correction before targeting $1,900

Gold prices have started out flat at the start of the week following a slightly bullish end to last week with prices closing on Friday 0.17% higher.

XAU/USD moved from a low of $1,870.30 to a high of $1,889.42, rising despite a bid in the greenback.

Gold recorded its third weekly gain as investors weigh up signs of rising inflation.

Lower bond yields have also helped boost investor appetite. Talk of tapering bond purchases also failed to illicit much concern. 

The dollar rose against a basket of currencies and was lifted by encouraging US manufacturing data. IHS Markit said its flash US manufacturing PMI increased to 61.5 in the first half of this month which was the best reading since October 2009.

The data followed a final reading of 60.5 in April, beating forecasts of 60.2. In other data, US existing home sales in April fell -2.7% to an annualised level of 5.85m (est. 6.07m). 

Nevertheless, the dollar remains under pressure in the wake of soft jobs data and remained on track for a weekly loss as traders' concerns about taper talk in US Federal Reserve minutes moderated.

DXY is trading at the lowest level since February 25 and is on track to test that day’s low near 89.683.  After that is the January 6 low near 89.209. 

''Ultimately, the threat of a taper looms large for gold, with angst also growing in rates markets as participants eye the massive Treasury supply on the horizon,'' analysts at TD Securities said, adding further:

''However, with investors sounding the alarm over inflation, institutional interest in the precious metals complex is likely to continue rising following months of outflows, providing an offsetting force against taper fears.''

''Ultimately, our rates strategists also caution that it is still too early for taper talk, which suggests gold bugs are likely to benefit from the ongoing increase inflows for the time being.''

Gold technically analysis

As per the prior analysis, Chart of the Week: Gold bears lurking at monthly resistance,  the bulls have moved in on the monthly dynamic resistance within a descending channel and this may leave a bearish bias for the week ahead.

A 50% mean reversion comes in at $1,822 while a continuation to the upside would target $1,900.