Gold Forecast: Eying Breakout of $1,815 as Yields Suffer amid Omicron

Gold Forecast: Eying Breakout of $1,815 as Yields Suffer amid Omicron

  • The yellow metal starts the week cautiously, holding around a one-month high.
  • Omicron had 4,500 flights canceled worldwide during the holiday season.
  • At BBB-Passage, US Vice President Harris says retail sales in the US were up 8.5% over the holiday season.

Gold forecast remains slightly positive as the Omicron spread weighs on the US yields, providing room for the gold buyers to continue upside.

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On a slow Monday morning, gold (XAU/USD) gained around $1,810. In response to a weak US dollar and low yields on government bonds, the yellow metal rose near the monthly high reached on December 17.

Meanwhile, the 10-year US Treasury yield fell 1.1 basis points (bps) to 1.482% from a two-week high that pulled back in the afternoon, as the US dollar index (DXY) fell 0.08% to 96.10. Meanwhile, S&P 500 futures were up 0.11% at 4,720 points at press time.

There are mixed concerns about the South African variant of COVID-19, namely Omicron, and cautious optimism about Joe Biden’s Build Back Better (BBB) plan, fueling recent risks. In addition to positive results, the Mastercard report pointed to weak industrial profits in China and increased US retail sales.

The absence of key data/events on holiday sentiment in New Zealand, Australia, Canada, and the UK limits market movements. However, a reading of 13.2 is expected for the Dallas Fed Manufacturing Index for December, up from 11.8 earlier, which may offer some temporary relief during the expected sluggish period.

Gold buyers should also note studies showing fewer hospitalizations and positive spending in the US due to Omicron. In addition, Reuters released a Mastercard report showing that US retail sales were up 8.5% from November 01 to December 24.

Despite recent challenges from Senator Joe Manchin, Vice President Harris is hopeful that President Joe Biden will accept the Build Back Better (BBB) plan. However, according to Goldman Sachs, “Congress is likely to approve some new investments in manufacturing and supply chain incentives, but we do not expect the Senate to approve the Build Back Better bill and its short-term costs to extend the extended child tax credit.”

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Gold price technical forecast: Rangebound behavior

gold forecast

The gold price remains confined within a range, wobbling near the upper limit. The average daily range is 31% at the moment, indicating low volatility. The volume for the minor up wave is declining, which shows that there is low technical buying at the moment. Therefore, we expect a rejection from the upper band of the range.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.