Gold Price Forecast: XAU/USD flat lined above $1,750 level, bearish bias remains

• A combination of factors failed to assist gold to capitalize on its modest intraday gains.
• Rallying US bond yields underpinned the already stronger USD and capped the upside.
• Worries about Evergrande’s debt crisis seemed to be the only factor lending support.
• Gold Price Forecast: Will XAU/USD sustain above $1750? Focus on Fedspeak, US data

Gold gained some positive traction on the first day of a new trading week, albeit lacked any follow-through and met with some fresh supply near the $1,760 region. The intraday pullback was sponsored by a combination of factors and dragged the XAU/USD to fresh daily lows, around the $1,744 area during the early North American session. A generally positive tone around the equity markets turned out to be a key factor that capped the upside for the safe-haven precious metal. Apart from this, a modest US dollar strength further weighed on the dollar-denominated gold.

The USD continued drawing some support from prospects for an early interest rate hike by the Fed and got an additional boost from a fresh leg up in the US Treasury bond yields. It is worth recalling that the so-called dot plot indicated policymakers' inclination to raise interest rates in 2022. The repricing of the likely timing of the Fed's policy tightening pushed the yield on the benchmark 10-year US government bond to the 1.50% threshold for the first time since June. This was seen as another factor that acted as a headwind for the non-yielding gold.

On the economic data front, the US Durable Goods Orders increased 1.8% in August and surpassed expectations for a 0.7% rise by a big margin. Adding to this, the previous month's reading was also revised higher to show a 0.5% growth as against a modest decline reported earlier. Additional details revealed that orders excluding transportation rose 0.2% vs. 0.5% expected. This, however, was offset by stronger non-defence capital goods orders excluding aircraft – a closely watched proxy for business spending plans.

That said, persistent worries about potential risks from the debt crisis at China Evergrande Group helped limit deeper losses for the XAU/USD, at least for the time being. Nevertheless, gold prices remain well within the striking distance of the lowest level since August 11, around the $1,738 region touched last Thursday and remains vulnerable to slide further. However, it will be prudent to wait for a strong follow-through selling before positioning for an extension of the recent downward trajectory from the 1,832-34 heavy supply zone.

Technical outlook

From current levels, a subsequent slide below monthly swing lows is likely to find some support near the $1,730-28 horizontal zone. The next relevant support is pegged near the $1,700 round-figure mark, which if broken decisively will set the stage for a further near-term depreciating move for gold.

On the flip side, momentum beyond the daily swing highs might confront stiff resistance near the $1,775-76 area ahead of the $1,780 horizontal support breakpoint. A sustained strength beyond has the potential to lift the XAU/USD further and allow bulls to aim back to reclaim the $1,800 mark.

Levels to watch