Gold Price Forecast: XAU/USD manages to defend 200 DMA as traders await US PCE data

  • Gold price finds some support near the 200-day SMA amid a modest USD downtick.
  • Reviving bets for additional Fed rate hikes to limit the USD losses and cap the metal.
  • Investors now look forward to the US PCE data before placing fresh directional bets.

Gold price is seen oscillating in a narrow band, below the $1,800 mark, during the Asian session on Friday and consolidating the previous day’s fall of more than 1%. A modest US Dollar downtick turns out to be a key factor lending some support to the dollar-denominated commodity, though reviving bets for a more aggressive policy tightening by the Fed act as a headwind. Against the backdrop of a more hawkish commentary by the Fed last week, the upbeat US macro data released on Thursday fueled expectations that the US central bank will have to retain its hawkish stance to tame inflation.

In fact, the US GDP growth for the third quarter was revised higher to show that the economy expanded by 3.2%, faster than the 2.9% estimated previously. Adding to this, the number of Americans filing new claims for unemployment-related benefits increased less than expected during the week ended December 17, pointing to a still-tight labour market and resilient US economy. This reaffirms hawkish Fed expectations and pushes the US Treasury bond yields higher, which supports prospects for the emergence of some USD dip-buying and should keep a lid on the non-yielding gold price.

Traders, meanwhile, seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the focus remains glued to the US Personal Consumption Expenditure (PCE) data. The Core PCE Price Index, the Fed’s preferred inflation gauge, will provide fresh cues on inflation and influence the rate-hike path. This, in turn, will play a key role in driving the USD demand in the near term and help determine the next leg of a directional move for Gold price. In the meantime, the XAU/USD is likely to prolong the subdued/range-bound price action, warranting caution for aggressive traders.

Technical Outlook

From a technical perspective, the overnight sharp fall stalls just ahead of the very important 200-day SMA. The said support is currently pegged near the $1,784-$1,783 region and should act as a pivotal point. This is followed by support near the $1,774 level ahead of the $1,767-$1,766 area. A convincing break below the aforementioned support levels will negate any near-term positive bias and prompt aggressive technical selling. Gold price might then turn vulnerable and accelerate the fall towards the next relevant support near the $1,740-$1,738 horizontal zone.

On the flip side, momentum back above the $1,800 mark might now confront stiff resistance near the $1,810-$1,812 region. Some follow-through buying has the potential to lift Gold price back towards the $1,824 level, or the multi-month high touched earlier this December. A sustained strength beyond will be seen as a fresh trigger for bullish traders and pave the way for a move towards the next relevant hurdle near the $1,858-$1,860 area. 

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