The USD index jumped to fresh four-month tops at the beginning of the week before correcting slightly lower
Gold prices have been retaining a modest bullish bias for the third session in a row. However, the precious metal lacks upside impetus to stage a more robust and sustained recovery following a sell-off witnessed last week. The bullion has been struggling to overcome the $1,767 area since last Friday, refraining from a break above the $1,800 figure despite dollar demand has eased on Tuesday.
The USD index jumped to fresh four-month tops at the beginning of the week before correcting slightly lower today. The prices have settled above the 93.00 figure but stays cautious despite the move higher in US 10-year yields to levels above 1.34%. It looks like the greenback will stay within a tight range in cautious trading ahead of the Federal Reserve policy meeting that concludes on Wednesday.
Against this backdrop, the yellow metal could struggle for direction below the $1,780 area in the near term. The outcome of the Fed’s gathering will set further direction to gold prices. Should the central bank hint at tapering bond purchases, the dollar will rally across the board in a knee-jerk reaction. In this scenario, the XAUUSD pair may threaten the $1,740 region that capped losses yesterday. The bond-buying announcement will likely come at the November meeting.
From the technical point of view, gold prices need to regain the $1,780 zone in order to challenge the 20-DMA, followed by the $1,800 key figure. It looks like the bullion would stay below this barrier in the coming days while downside risks could reemerge due to a strong dollar. In a wider picture, gold needs to stay above a slightly ascending 100-week SMA (today at $1,755) in order to avoid fresh losses following two bearish weeks.