Gold Price Forecast: XAU/USD remains resilient near $1,750 as US T-bond yields retreats

• Gold attempts to recover part of its previous day’s losses on Friday.
• Higher US Treasury yields underpins the demand for the US dollar
• Mixed sentiment on FOMC policy update, renewed concerns of Chinese Evergrande debt crisis support prices near lower levels for gold.

Gold prices print more than 0.50% gains on Friday after posting a single day fall of more than $30 in the US session. The prices fell around 1% on Thursday, the move sponsored by the higher US dollar following the US Federal Reserve's plan on reducing stimulus as soon as November. Gold is headed on track for a third consecutive week of declines.

The US Dollar Index, which tracks the performance of the greenback against the basket of six major currencies, droops near a one-week low on Friday,making the precious metal cheaper for other currencies holders. The greenback came under selling pressure tracking the pessimistic US economic data.

The US Initial Jobless Claims rose unexpectedly in the week ending on September 18 at 351K. But the market assessed that the underlying trend remained consistent as it showed steady recovery of the labor market.

The US Federal Reserve lowered its growth estimates for 2021 and raised the inflation forecast but insisted tapering could begin as soon as November and end next year but also stated that the door is open to more stimulus if the economy needs. The Central bank downgraded its Gross Domestic Product (GDP) growth projections for 2021 to 5.9% from 7%, and also hinted interest rate hikes could occur earlier than expected.

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, which is supporting the gold prices near the lower levels.

 
Technical levels

Gold prices have been trading in a broader range of $1,750 and $1,830 since late June. XAU/USD touched the low of $1,687.78 on August 9 after breaking the range shortly. The prices trade below the 20-day Simple Moving Average (SMA) at 1.801.35, which is confirming the downside pressure on the gold.

XAU/USD daily chart

The Moving Average Convergence Divergence (MACD) holds below the midline with a bearish crossover. Any downtick in the MACD indicator would  amplify the selling pressure and the prices would approach toward the low made on August 11 at $1,724.18. A daily close below the $1,720 horizontal support level would entice bears to retest the levels last seen in April. XAU/USD bears could meet the April 1 low at $1,705.84.

Alternatively, if price sustained intraday high, it could retrace back to the $1,770 horizontal resistance level followed by the high made on September 22 at $1,787.35. A daily close above the 20-day SMA would mean the psychological $1,800 for XAU/USD.

XAU/USD additional levels