Title: Gold Price Forecast: XAU/USD flat-lined below 100/200-DMAs confluence resistance

Dec 06, 2021 2:42AM ET

By: AnalysisWatch

The gold price on Friday tried to benefit from the one-month low hit the previous day and posted a subdued or range-bound performance on the main day of another trading week. The XAU/USD pair remained trapped in a narrow band during the early European session and was last seen hovering just above the $1,780 level in neutral territory.

Firming assumptions about a faster policy setting by the Fed were a key component that proved to be a headwind for the low-yielding yellow metal.

Investors seem convinced that the Fed would be forced to respond more forcefully to contain stubbornly high inflationary tensions. Indeed, even Friday's mixed US NFP report did virtually nothing to change the Fed's hawkish assumptions. Indeed, FX markets show a high probability that the Fed will raise bond rates by May 2022. Apart from this, the threat posed by the economic sectors caused a slight upswing in US government bond yields. This helped the US dollar bounce back and further depreciated dollar-denominated gold.

Global risk sentiment stabilized after reports indicated that Omicron patients had only relatively mild symptoms. This was reflected in the generally positive sentiment in the equity markets, which was seen as another factor limiting the upward trend in safe-haven gold. However, the lack of fresh selling warrants some caution for bearish traders and positioning for a sharp intraday decline in the absence of relevant market-moving economic news. Nevertheless, the fundamental backdrop argues for an extension of the recent sharp correction from the $1,877 level, or the five-month high reached in November.