Gold Price Forecast: XAU/USD bullish near eight-months highs as US Dollar keeps falling

  • Gold price holds onto recent gains as the rally in Wall Street continues.
  • A weaker US Dollar offers support to XAU/USD that continues to look at $1,880.
  • Strong demand for Treasury bonds as market participants await a less hawkish Fed.

Gold prices are holding up and near the $1,880 area on Monday, supported by another slide of the US Dollar across the board, amid risk appetite and lower US Treasury bond yields. Technical bias points to further gains for the yellow metal.

US Dollar drops to lowest in months

The US Dollar, measured by the DXY is trading at the lowest level since June 2022, approaching 103.00, down 0.75% for the day, falling for the second day in a row. The greenback weakened on Friday following US economic data that included a mixed NFP report and an concerning ISM Service Sector PMI report.

Even USD/JPY is trading in negative territory on Monday after being unable to hold onto daily gain, and is back under 132.00. EUR/USD is at the highest level in six months while AUD/USD is at 0.6950, the highest since late August.

US Treasury bonds on demand

Last week’s economic data boosted speculations about a slowdown in the Fed rate hike cycle, favoring an increase of 25 basis points instead of a 50 bps. US Treasury yields tumbled on Friday and remains near the lows on Monday, with the US 10-year Treasury yield at 3.55%, the lowest since December 19 and the 2-year at 4.22%.

European yields are modestly higher but still near weekly lows. The rise in sovereign bond yields is a positive development for gold prices. As long as the market environment favors less hawkish monetary policy in Europe and the US, XAU/USD will likely remain strong.

Risk appetite: other positive for gold

After rising more than 2% on Friday, US equity prices are having another great day. The S&P 500 is up by 1.25% and the Nasdaq gains almost 2%. The improvement in market sentiment is also boosting commodity prices. The WTI barrel is at 75.85$, off highs but by 2.75%. Even cryptocurrencies are up with Bictoin at $17,260 and Ethereum up by 5.35% at $1,337.

Gold: Cleary bullish above $1,825

Last week, XAU/USD broke above $1,830, and it consolidated above strengthening the outlook for the yellow metal. The price peaked on Monday at $1,881.53, the highest level since June. It then pulled back finding support above $1,870.

The RSI is about to hit overbought readings suggesting that a correction or a consolidation might take place before the next leg higher. The next target is seen at $1,890, the last line of defence for a test of $1,900.

The bullish outlook for gold prices will remain strong while it holds above $1,825/30. The mentioned zone is a strong horizontal support and also currently an uptrend line is seen. A break lower would favor more losses.

Gold daily chart