Gold Price Forecast: XAU/USD looks set to regain $1,760 as USD tracks softer Treasury yields

Gold refreshes intraday high during three-day uptrend, consolidates weekly losses.
Market sentiment dwindles amid covid and vaccine news, tapering concerns during a light-calendar day in Asia.
US Michigan Consumer Sentiment Index, risk catalysts to direct short-term moves around the key horizontal hurdle.
August starts illy for gold, could September change anything?

Gold (XAU/USD) rises for the third consecutive day, up 0.10% around $1,756, during Friday’s Asian session. The metal’s recovery from a five-month low, marked on Monday, takes clues from the US dollar’s pullback amid a sluggish session filled with no major data/events and dead news feeds.

The US Dollar Index (DXY) drops 0.06% on a day to 92.96 by the press time. In doing so, the greenback gauge seems to track downbeat US Treasury yields. That said, the US 10-year Treasury yields step back from the monthly high, marked on Thursday, by declining 1.3 basis points (bps) to 1.35% at the latest.

It’s worth mentioning that the downbeat performance of equities in Asia-Pacific, despite positive plays of the Wall Street benchmarks, keeps a tab on the gold buyers.

While checking on the catalysts, the COVID-19 and Fed’s tapering constitute a major theme. As per the latest virus data, infections in Queensland and Victoria stay closer to the recent highs whereas China reports 99 new cases versus 81 marked the previous day. Further, Thailand reports a daily record of 23,418 new covid cases whereas the US death toll remains near a five-month high.

On other hand, the previous day’s US Producer Price Index (PPI) data for July renewed reflation woes. Following this, Reuters’ poll said, “The Federal Reserve will announce a plan to taper its asset purchases in September.” Also, US inflation expectations keep favoring the policy hawks.

Amid sentiment-positive catalysts was US President Joe Biden called on lawmakers to enact legislation aimed at lowering drug prices, including allowing Medicare to negotiate drug prices and imposing penalties on drugmakers that hike prices faster than inflation, per Reuters. Furthermore, Moderna’s study suggesting a six-month antibody versus the virus strains keeps traders hopeful.

Given the mixed plays, the US dollar’s weakness can help gold to consolidate some more of its weekly losses.

Although tapering and covid woes can keep favoring the greenback, today’s US Michigan Consumer Sentiment Index for August, expected to remain unchanged near 81.2, will be important to watch.

Read: US Michigan Consumer Sentiment August Preview: Payrolls, inflation and the pandemic

Technical analysis

Gold bulls attack a six-week-old horizontal resistance area amid bullish MACD by the press time.

The commodity needs to cross the $1,760 to extend the corrective pullback from the multi-day low flashed earlier in the week.

Following that, a convergence of 100-SMA and a horizontal area from late June, surrounding $1,790-91, as well as the $1,800 threshold, will challenge the gold buyers before giving back controls to them.

On the flip side, an ascending support line from Tuesday, near $1,747, followed by $1,738 and $1,718, challenge gold sellers ahead of directing them to the $1,700 psychological magnet.

Should the gold bears keep reins past $1,700 the yearly low near $1,676 will regain the market’s attention.