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  • The PPI from August surged to 0.7% against the expected 0.6% and supported the US dollar. 
  • On Monday, the gold price forecast remains bullish above a double bottom support level of 1,793 today.
  • Forex trading market participants may buy above the $1,783 level to target the $1,801. 

Gold prices closed at $1792.10 after reaching a high of $1806.00 and a low of $1788.20. Gold prices dropped on Friday amid the strength in the US dollar. On Monday, the gold price forecast remains bullish above a double bottom support level of 1,793 today.

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The stronger dollar continues to keep gold bearish.

The US Dollar Index, which measures the greenback’s value against a basket of six major currencies, rose to 92.6. It’s bolstering the US dollar and weighing on gold prices. The 10-year Treasury yield in the United States rose to 1.35% on Friday, adding further support to the US dollar and weighing on gold prices.

US Federal Reserve’s tapering timeline 

Another reason behind the declining prices of gold was uncertainty over the US Federal Reserve’s tapering timeline that kept most investors on the sidelines. Moreover, the US Treasury yield on the benchmark 10-year note remained high after the economic data indicated high inflation could persist for some time. This kept the yellow metal under pressure because gold is considered a hedge against inflation, and higher yields mean higher opportunity costs for holding non-yielding bullion.

Gold marked its first weekly loss in five partly because of the macroeconomic data showing US producer prices increased by 8.3% in August, which is their highest level in over a decade. This rise in prices could be due to inflationary pressure insistently rising in an economy trying to recover from the damages caused by the coronavirus pandemic. The aggravated price pressures in the United States have been blamed on the Fed’s stimulus program and other monetary accommodations.

Since the COVID-19 outbreak in March 2020, the central bank has been buying $120 billion in bonds and other assets to support the economy. The bank has also reduced its interest rates at virtually zero levels for the past 18 months.

Quick Update on Economic Events

The tapering of stimulus measures by the Fed has been a hotly debated topic recently as economic recovery came under question with the resurgence of the Delta variant of coronavirus. However, the argument of tapering cooled down after the US jobs growth for August fell 70% short of the economists’ target.

On the data front, at 17:30 GMT, the PPI from August surged to 0.7% against the expected 0.6% and supported the US dollar. It added to further losses in gold prices. In August, the Core PPI was also raised to 0.6% against the projected 0.5% and supported the US dollar, which further increased the decline in yellow metal prices. At 19:00 GMT, the final wholesale inventories remained flat with projections of 0.6%.

Gold Price Forecast
XAU/USD Daily Chart

Gold Price Forecast – Daily Support and Resistance

Support Resistance

1788.06 1789.86

1787.38 1790.98

1786.26 1791.66

Pivot Point: 1789.18

Gold Price Forecast – Descending Triangle Underpins Gold at 1,783 

 On Monday, the gold price forecast remains bullish above a double bottom support level of 1,783 today. On the 4 hour timeframe, gold faces immediate resistance at the 1,793 level, which is being extended by 50 periods of the exponential moving average. A breakout of the 1,793 level will likely extend a buying trend until the next resistance level of 1,801.

An additional break out of the 1,801 level can expose gold prices towards the next resistance level of the 1,815 level. In contrast, gold may find immediate support at the pivot point level of 1,783. However, a bearish breakout below this level could extend the selling trend until the next support levels of 1,777 and 1,773.

Taking a look at the 50 periods EMA (exponential moving average – red line), it is holding around the 1,793 level. The closing of candles below this level supports a selling bias in the precious metal, gold. Moreover, the leading indicator, Stochastic RSI, rests in a selling zone below 50. It indicates a selling bias in gold.

Lastly, the descending triangle pattern typically breaks below on the lower side. Therefore, the violation of the 1,783 level can trigger further selling until the 1,773 level in gold.

Therefore, Forex trading market participants may buy above the $1,783 level to target the $1,801. Alternatively, traders can take a sell position below the $1,783 level today. All the best!

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