News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
XAU/USD: Gold Price Attempts to Base as US Dollar Peels Back

XAU/USD: Gold Price Attempts to Base as US Dollar Peels Back

Rich Dvorak, Analyst

XAU/USD PRICE OUTLOOK: GOLD SELLING STABILIZES NEAR 100-DAY MOVING AVERAGE AS MARKET SENTIMENT IMPROVES

  • Gold jumped higher by 1% on Monday as precious metals aim to stabilize after falling sharply
  • Gold price action likely hinges on fiscal stimulus speculation and broader liquidity conditions
  • XAU/USD gained ground while the US Dollar Index pivoted lower amid recovering risk appetite

Gold prices edged 1% higher to start the week in an attempt to erase steep losses recorded over recent trading sessions. The precious metal has slid by nearly 5% month-to-date, but gold selling pressure seems to have stalled out near its 100-day moving average. Improving trader sentiment on the back of rekindled fiscal stimulus negotiations seems to be weighing negatively on the anti-risk US Dollar, which is likely propelling the advance by XAU/USD price action.

GOLD PRICE CHART WITH US DOLLAR INDEX OVERLAID: DAILY TIME FRAME (07 APR TO 28 SEP 2020)

Gold price chart with US Dollar Index Overlaid

Chart created by @RichDvorakFX with TradingView

Generally speaking, there is a strong inverse relationship between gold prices and the US Dollar. This inverse relationship has strengthened notably this month with the gold to US Dollar correlation coefficient plunging to -0.91 from -0.11 clocked on 31 August. As such, the direction of the broader US Dollar Index could exert a greater influence on where gold price action trends next.

GOLD PRICE CHART: DAILY TIME FRAME (25 MAR TO 28 SEP 2020)

Gold Price Chart Forecast XAU USD

Chart created by @RichDvorakFX with TradingView

Gold might continue to face headwinds with the US Dollar showing signs of a bullish reversal amid an aggressive uptick in market volatility. That said, the 38.2% Fibonacci retracement level of this year’s trading range, as well as the 100-day simple moving average, have provided buoyancy to gold price action so far. Sustained improvement in market sentiment, likely accompanied by a deeper US Dollar pullback, could facilitate a larger rebound by XAU/USD.

This could bring support-turned-resistance near the $1,920/oz price level into focus as a potential area where the precious metal might face renewed selling pressure. On the other hand, a breakdown in risk appetite and liquidity conditions could send traders flocking into safe-haven currencies like the US Dollar, which could bode poorly for gold. Taking out last week’s lows and slipping beneath the 100-day moving average increases the potential for gold to stretch even lower toward the $1,790-price level.

Keep Reading: Gold Price Forecast Bright & Volatile as USD, Real Yields Swing

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES