Gold Price Analysis: XAU/USD looks to $1,840 on USD strength, key support break

Gold (XAU/USD) licks its wounds around $1,864, following the drop to weekly/monthly low surrounding $1,860, ahead of Monday‘s European session. In doing so, the gold sellers cheer Friday’s downside break of the key support as well as firmer US dollar.

The US dollar index (DXY) prints 0.07% gains, up for the second consecutive day, as market players seek solace in the greenback amid fears of the Feds tapering.

The indecision over Wednesdays Federal Open Market Committee (FOMC) magnified following another upbeat US data, namely Michigan Consumer Sentiment Index. However, softer print of the inflation component allows the Fed policymakers to keep their defense to easy money policies.

Also on the same line could be the mixed releases of the latest US employment data and chatters over the supply crunch portraying a short-term challenge to the price pressure. Its worth mentioning that a one-month low of the US inflation expectations, per 10-year breakeven inflation rate data from the St. Louis Federal Reserve (FRED), also favors the doves at the Fed.

Other than the pre-Fed jitters, the Western push to reinvestigate covid origins and dislike for China‘s performance in Xinjiang and Hong Kong, per the latest Group of Seven (G7) meetings, should also favor the USD, which in turn weighs on the gold prices by the press time. Furthermore, uncertainty over US President Joe Biden’s infrastructure spending plan adds to the golds weakness.

Amid these plays, S&P 500 Future print mild gains but the US 10-year Treasury yields remain indecisive by the press time.

Moving on, a light calendar and an off in Australia, as well as China, could restrict golds short-term moves but the bears are less likely to relinquish controls.

Golds clear break of $1,877-75 support confluence, comprising a 2.5-month-old rising trend line and a horizontal area from late January, keeps sellers hopeful amid the most bearish MACD signals since early May.

While the monthly bottom surrounding $1,855 can offer an intermediate halt, the metal‘s declines towards testing 200-day SMA (DMA) level of $1,840 can’t be ruled out unless it jumps back beyond $1,877.

Its worth noting that any further weakness past 200-DMA will make gold prices vulnerable enough to retest late February tops near $1,816.

On the contrary, a daily closing beyond $1,877 needs to cross the $1,900 threshold, as well as a falling trend line from early January near $1,907, to recall the gold buyers.

Following that, the previous months peak surrounding $1,917 and the yearly peak close to $1,960 should return to the charts.