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Gold Price Forecast: XAU/USD Rejected at 1,800, Momentum Building

Talking Points:

  • Gold is unable to break above 1,800, looking out for key Fibonacci support
  • XAU/USD key levels to watch

Gold (XAU/USD) is having a solid attempt at recovery but has been rejected at the 1,800 level for the fourth time in two weeks. Tuesday’s move saw the commodity correct back towards its key support at the 23.6% Fibonacci (1,770), where the 20-day simple moving average is now in confluence. Part of this move lower is attributed to US Treasury Secretary Janet Yellen’s comments about the possibility of rising rates in the long-term to avoid an overheating economy.

To be honest, there is no new information in what she said, and nothing we didn’t already know, but it seems investors were spooked by the fact it came out of her mouth, or so they say. If we look at an hourly chart, XAU/USD had already bounced off the area surrounding 1,800 and was heading lower before Yellen’s speech, after which the selloff intensified. Given the lack of a move in bond yields, one could argue what really moved markets in yesterday’s session.

Regardless of the effect of her words, there is strong confirmation that 1,800 continues to be a tough area of resistance for buyers to break. The sideways consolidation seen in the past two weeks could either see buyers gathering momentum to attempt another break higher, or it could be weakening the ability to break above this key resistance, with another possible turn lower.

XAU/USD KEY LEVELS:

If XAU/USD is able to close above 1,800 then there is likely to be strong momentum to get the commodity towards 1,850. Along the way, there is likely to be some strong resistance, with the 38.2% Fibonacci (1,827) being a good candidate. A break above 1,831-45 would put XAU/USD back above the ascending trendline from the March 2021 lows, which would likely consolidate bullish momentum further.

If unable to break its key resistance, we could see gold drifting lower again, towards key support at 1,765-55.

XAU/USD Daily chart

Source: Refinitiv

Fibonacci Confluence on FX Pairs

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin


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