In the longer term, the yellow metal could struggle during the first quarter of 2022
Gold prices briefly jumped to more than one-month highs around $1,820 on Tuesday before reversing sharply amid the resurgent demand for the safe-haven dollar as risk demand has waned overnight, with stock markets looking mixed on Wednesday.
As such, the precious metal slipped back to the $1,805 area while staying under pressure today. The XAUUSD pair is now threatening the $1,800 psychological mark that could prevent the bullion from a deeper retreat along with the 200-DMA, currently at $1,797. The daily RSI looks directionless in the neutral territory, suggesting the bearish potential remains limited at this point.
Meanwhile, the greenback is trending higher against major rivals on Wednesday, with the USD index challenging nearly one-week highs on the 96.40 area. The dollar was last seen changing hands at 96.38, up 0.18% on the day. Some deterioration in risk sentiment across the financial markets coupled with rising US Treasury yields sent the dollar higher across the board after the recent retreat.
As long as the greenback stays elevated, gold prices will continue to struggle around the $1,800 figure. However, it looks like the downside would be limited, especially as trading volumes are getting thinner ahead of the New Year holiday.
In the immediate term, the XAUUSD pair needs to hold above the mentioned moving average in order to stay afloat and see a bounce higher eventually. On the upside, the nearest resistance now arrives at $1,807, followed by the $1,813 area and the mentioned highs around $1.820.
In the longer term, gold prices could struggle during the first quarter of 2022 as the dollar will likely continue to derive support from a hawkish Fed. Also, the ongoing pandemic may support the safe-haven demand for the US currency, suggesting the yellow metal could come under pressure at the start of next year.