Gold Price Forecast: XAU/USD looks to range between key Fibo levels ahead of Fed

  • Gold price is finding its feet as US dollar bulls take a breather on Monday.   
  • Investors resort to repositioning amid month-end flows and ahead of the Fed.
  • XAU/USD eyes seventh straight monthly decline while confined within two key barriers.

Gold price is looking for a positive start to a big week ahead, although it will book the seventh consecutive monthly decline. After Friday’s brutal sell-off, the bright metal is trying to find its feet, as the US dollar rebound loses steam despite a cautiously optimistic market environment. China’s NBS Manufacturing and Services PMIs contracted in October while many cities and entertainment places are under strict restrictions as covid cases resurface. Investors also trade with caution ahead of the Fed and BOE rate hike decisions and the US Nonfarm Payrolls release due later this week. The latest leg down in the dollar could also be associated with the end-of-the-month position readjustments while pre-Fed anxiety also prompts them to profit-taking on their recent dollar longs. The precious metal, however, could struggle amid positive US Treasury yields, as the benchmark 10-year US rates hold above the 4.0% key level heading into the expected Fed 75 bps rate increase.

It’s Halloween this Monday and relatively quiet US economic data, leaving risk trends and month-end flows to lead the way. Also, the Eurozone Preliminary GDP and inflation figures will be closely eyed and could have a significant market impact, affecting dollar trades and, eventually the bullion.

Also read: Gold, Chart of the Week: XAU/USD its make or break time

XAU/USD price extended the previous decline and plunged nearly $20 on Friday, hitting the lowest weekly level at $1,638. Despite the risk rally on Wall Street, the dollar resurgence alongside the yields weighed heavily on the metal. Stocks shrugged off downbeat earnings reports from giants such as Meta, Amazon etc, as investors capitalized on the end-of-the-week activity. Meanwhile, the greenback buyers paid little heed to the US PCE Price Index, which stayed unchanged at 6.2% on a yearly basis in September. The Core PCE Price Index, the Fed’s preferred inflation measure, edged higher to 5.1% from 4.9% in August.

Gold price technical outlook: Daily chart

Nothing seems to have changed technically for Gold price, as it remains in a pre-defined range between two key Fibonacci Retracement (Fibo) levels on the daily time frames.

The $1,674 upside target continues to cap the bullish attempts. That level is the 50.0% Fibo level of the October decline from $1,730.

Meanwhile, the downside remains cushioned by the 78.6% Fibo level of the same descent, which is at $1,640.

Gold traders await the Fed outcome for a sustained break from the ongoing range but risks to the downside seem compelling, as the 14-day Relative Strength Index (RSI) is trading listlessly while below the 50.00 level. This suggests that bears will likely retain control going forward.

On the upside, the immediate resistance is seen at the $1,650 psychological level, above which the 21-Daily Moving Average (DMA) at $1,667 could be challenged.

Bulls need a weekly close above the 21DMA to revive the recovery momentum from monthly troughs. Monday’s high at $1,671 will then come into play.

Alternatively, the previous week’s low at $1,638 will be on sellers’ radars, below the 78.6% Fibo support. The monthly low of $1,617 will be the level to beat for XAU/USD bears.

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