Gold Price Forecast: XAU/USD benefits from softer United States Treasury bond yields, Wall Street gains

• Gold price remains on course to second monthly gain amid market’s cautious optimism, pullback in United States Treasury bond yields.
• Mixed headlines China, softer US data weighed on US Dollar and allowed XAU/USD to remain firmer despite escalating Russia-Ukraine tussle.
• Gold traders remain little active amid year-end holiday mood, light calendar.

Gold price (XAU/USD) remains firmer around $1,815, even with less momentum strength, as traders brace for the final trading day of 2022 on early Friday.

The yellow metal cheered the latest pullback in the United States Treasury bond yields to post mild gains while paying little attention to the risk-negative headlines surrounding China’s Covid conditions and the geopolitical tension in Ukraine. The reason could be linked to Beijing’s reopening, softer US Dollar and upbeat performance of Wall Street.

Gold rises as United States Treasury bond yields ease 

Given the negative correlation with the United States Treasury bond yields, Gold price benefited from a pullback in the key bond coupons from the multi-day high. That said, the US 10-year Treasury bond yields marked the first daily loss in five while reversing from the six-week high, down 1.75% to 3.82% by the end of the day. It’s worth noting that Wall Street benchmarks closed with overall positive performance by rising more than 1.30% each.

In doing so, the bond market cheered mixed US data and receding hopes of the global economic recession even as the fears of the COVID-19 and geopolitical tension between Ukraine and Russia continue.

US Initial Jobless Claims rose 225K versus 216K prior for the week ended on December 24 while the Continuing Jobless Claims increased by 1.71M from 1.669M previous readout during the week ended on December 16. However, the 4-week moving average for the same dropped to 221K versus the revised down previous readings of 221.25K.

It’s worth noting that earlier in the week San Francisco Fed came out with a research that ruled out recession for at least two quarters.

China Covid conditions flash mixed signals to markets but positive for Gold

Around seven major nations have recently announced Covid test requirements for Chinese travelers as the virus cases swirl in the dragon nation but Beijing reverses the “Zero-Covid” policy.

On Thursday, China’s Center for Disease Control and Prevention (CDC) top epidemiologist Wu Zunyou warned that Covid is seen spreading throughout the holiday season.

However, Italy’s rejection of fears of any new Covid variant, after finding 50% of flight passengers being infected from the virus, seemed to have helped the markets in ignoring the fears from the virus.

On the same line could be the headlines suggesting China’s discovery of a Covid antiviral pill and hopes of the CDC board to overcome the COVID-19 fears by citing peak of virus spread in Beijing, Tianjin and Chengdu.

Given China’s status as the key Gold user, the nation’s unlock and receding virus fears help the XAU/USD price.

Russia-Ukraine fears remain ineffective despite heavy explosions

Although Moscow unveiled heavy missile fires on Kyiv and Kharkiv, a virtual meeting between China President Xi Jinping and Russian counterpart Vladimir Putin keep traders hopeful of overcoming the geopolitical tussles.

No major catalysts to entertain Gold buyers

Given the light calendar and  the year-end holiday season, the Gold traders are likely to keep favoring the upside momentum considering the latest market optimism. However, risk catalysts should be eyed for clear directions as China Covid woes join the Ukraine-Russia tension.

Gold price technical analysis

Despite being mostly inactive in December, Gold price defends its early November’s breakout of the 21-Daily Moving Average (DMA) while grinding higher.

The metal’s upside momentum, however, have recently lost momentum, as per the latest red signals from the Moving Average Convergence and Divergence (MACD) indicator. Even so, the firmer Relative Strength Index (RSI) line, placed at 14, favors the north-side grind.

As a result, the XAU/USD is likely to continue trading higher, even at a slower pace, unless breaking the 21-DMA support of $1,796.

Following that, November’s peak around $1,786 and the monthly bottom of $1,765 could act as the last defense of the Gold buyers before directing the precious metal towards the late November swing low near $1,721.

Alternatively, the recent swing high near $1,833 could act as the immediate hurdle for the Gold buyers to watch before targeting another battle with an upward-sloping resistance line from early October, close to $1,850 at the latest.

In a case where the XAU/USD remains firmer past $1,850, June’s peak surrounding $1,880 could act as an intermediate halt during the metal’s rush towards the $1,900 threshold.

Gold price: Daily chart

Trend: Further upside expected