Forex world

December 08, 2022

XAU/USD flat-lines around $1,785

- Gold price struggles to capitalize on its gains recorded over the past two trading sessions.

- Rebounding US Treasury bond yields revives US Dollar demand and acts as a headwind.

- Traders also seem reluctant amid uncertainty over the Federal Reserve’s rate hike path.

Gold price reverses an intraday dip to the $1,780 area and climbs to the top end of its daily trading range heading into the North American session. The XAU/USD is currently placed just above the $1,785 level, though lacks bullish conviction and remains below a technically significant 200-day Simple Moving Average (SMA).

Traders wait for clarity about the Federal Reserve’s rate hike path

The sideways consolidative move comes amid the uncertainty over the Federal Reserve's rate-hike path, which tends to drive the non-yielding Gold price. The current market pricing indicates over a 90% chance of a relatively smaller 50 bps rate hike move by the US central bank in December. That said, the recent positive macro data from the United States backed the case for further policy tightening and fueled speculations that the Fed may lift interest rates more than projected.

Focus remains on next week’s key data/event risk from the United States

Hence, the focus will remain glued on the upcoming Federal Open Market Committee (FOMC) monetary policy meeting on December 13-14. Heading into the key central bank event risk, investors will take cues from the release of the latest consumer inflation figures from the United States. The crucial CPI report plays a key role in influencing the Federal Reserve's policy outlook. This, in turn, should determine the near-term trajectory for Gold price, which is also seen as a hedge against inflation.

Rebounding US Treasury bond yields seems to cap Gold price

In the meantime, a goodish rebound in the US Treasury bond yields is seen acting as a tailwind for the US Dollar and keeping a lid on the Dollar-denominated Gold price. Apart from this, a generally positive risk tone, bolstered by the optimism over the easing of COVID-19 curbs in China, contributes to capping the upside for the safe-haven XAU/USD. The aforementioned factors might hold back traders from placing aggressive bets and supports prospects for an extension of the range-bound price action.

Gold price technical outlook

From a technical perspective, the 200-day SMA, currently around the $1,792-$1,793 area, is likely to act as an immediate hurdle ahead of the $1,800 psychological mark. The next relevant hurdle is pegged near the $1,810 area, or the multi-month top touched on Monday, above which Gold price could appreciate further towards the $1,830 hurdle. The momentum could eventually lift the XAU/USD to the $1,843-$1,845 supply zone.

On the flip side, the $1,775-$1,774 region could protect the immediate downside ahead of the weekly low, around the $1,765-$1,764 area. Some follow-through selling, leading to a subsequent break below the $1,761-$1,760 horizontal resistance breakpoint, will negate any near-term positive outlook and shift the bias in favour of bearish traders. Gold price might then turn vulnerable to accelerate the fall towards the $1,738-$1,737 area en route to the $1,725 level.

Key levels to watch

XAU/USD

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