The USD will likely stay elevated along with US Treasury yields, capping gains in the precious metal
Gold prices dipped to mid-December lows around $1,780 on Friday before attracting the buying pressure and the eventual rebound. However, the XAUUSD pair finished the week with deep losses while also staying below the $1,800 psychological level.
On Monday, the precious metal extends the recovery, flirting with the $1,800 level where the 20- and 200-DMAs arrive. It looks like the bullion would need an extra driver to make a decisive break above this immediate barrier in the near term, with downside risks persisting as the dollar is back on the offensive after a sell-off witnessed on Friday.
The USD index was trading just below the 96.00 figure during the European hours, adding 0.20% on the day. The greenback could receive another boost in the coming days if Fed’s Powell expresses a hawkish tone and the US CPI data point to the persistent inflation pressure. As such, the upside potential in the gold market remains limited for the time being, as the USD will likely stay elevated along with US Treasury yields.
From the technical point of view, the XAUUSD pair needs to overcome the mentioned moving averages in order to retarget last week’s highs at around $1,830. Of note, this zone capped the bullish potential in December as well, suggesting the barrier could be too strong for the gold bulls as long as the greenback stays afloat.
In a wider picture, the outlook for the yellow metal looks neutral while as long as the prices keep oscillating around $1,800. On the downside, the inability to hold above the $1,780 area would shift the market focus towards the $1,750 area that capped losses in mid-December.