Market news

12 October 2021

Gold Price Forecast: XAU/USD retraces daily advance on renewed USD strength

  • Gold advanced beyond $1,760 following Monday's choppy action.
  • 10-year US Treasury bond yield is down more than 1% on Tuesday.
  • XAU/USD needs to break out of $1,750-70 range to determine next direction.

The XAU/USD pair extended its sideways grind above $1,750 during the Asian session on Tuesday but managed to gather bullish momentum in the European trading hours. After rising to a daily high of $1,765, however, gold lost its traction and erased its daily gains. As of writing, the pair was trading virtually unchanged on the day at $1,754.

Following the three-day weekend, the US bond markets returned to action on Tuesday and the 2% decline witnessed in the benchmark 10-year US T-bond yield helped XAU/USD turn north. Although the 10-year yield managed to pull away from daily lows, it's still down 1.5% on a daily basis while holding above the key 1.6% mark.

Meanwhile, the US Dollar Index is trading at its highest level in more than a year at 94.51, not allowing XAU/USD to stage a convincing recovery.

The only data from the US showed on Tuesday that the NFIB Business Optimism Index edged lower to 99.1 in September from 100.1 in August. Later in the session, August JOLTS Job Openings data will be looked upon for fresh impetus.

Gold technical outlook

Despite the recent decline, the XAU/USD pair continues to trade within the two-week-old $1,750-70 range. Only a daily close outside of that channel could trigger a decisive move. 

In the meantime, the Relative Strength Index indicator on the four-hour chart continues to fluctuate between 40 and 60, confirming the view that XAU/USD is having a difficult time finding direction.

With a break below $1,750, gold could target $1,735 (static level) as the next target on the downside ahead of $1,725 (static level). On the other hand, the 200-period SMA forms significant resistance at $1,780.

Additional levels to watch for

 

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