Gold Price Forecast: XAU/USD consolidates in a range, bullish potential intact

• Gold was seen oscillating in a narrow trading band through the first half of the European session.
• A combination of factors extended some support, though the lack of buying warrants caution.
• Gold Price Forecast: XAU/USD set to test $1850 amid bullish technical setup, US PCE eyed

Gold consolidated the overnight strong gains back closer to monthly tops and oscillated in a narrow trading band, around the $1,825-30 region through the first half of the European session. Worries about the potential economic fallout from the fast-spreading Delta variant of the coronavirus continued weighing on investors' sentiment. This turned out to be one of the key factors that continued underpinning the safe-haven XAU/USD.

Meanwhile, the risk-off impulse in the markets triggered a fresh leg down in the US Treasury bond yields. This comes on the back of the Fed Chair Jerome Powell's dovish remarks on Wednesday and further acted as a tailwind for the non-yielding gold. Apart from this, the prevalent selling bias surrounding the US dollar extended some additional support to the dollar-denominated commodity, though the lack of any follow-through buying warrants caution for bulls.

Nevertheless, gold remains on track to record its biggest weekly gains since May 21 and seems poised to appreciate further amid signs that the Fed will stick to its ultra-lose policy stance for a longer period. The US central bank on Wednesday acknowledged that the economy has made progress towards the maximum employment and price stability goals. However, the Fed Chair Jerome Powell took a dovish turn at the post-meeting press conference.

Powell emphasised that they were some ways away from substantial progress on jobs. He was also cautious about tapering and said that policymakers discussed some details but it will take a few more meetings to get into it. The market speculations were further reinforced by Thursday's disappointing US GDP report, which showed that the world's largest economy expanded by 6.5% annualized pace in the second quarter as against the 8.5% growth anticipated.

Technical outlook

Looking at the technical picture, acceptance above the very important 200-day SMA favours bullish traders. That said, it will be prudent to wait for some follow-through buying beyond the monthly swing highs, around the $1,834 region, before positioning for any further upside. The next relevant hurdle is pegged near the $1,845-46 area, above which gold is likely to accelerate the momentum towards the $$1,866 area. Some follow-through buying should allow bulls to eventually aim to reclaim the $1,900 round-figure mark.

On the flip side, the 200-day SMA, currently around the $1,821 region, might now protect the immediate downside. This is followed by support near the $1,810 horizontal level, below which gold could slide back to the $1,800 mark. Some follow-through selling below the key $1,790 support might prompt some aggressive technical selling. The next relevant support is pegged near the $1,765-60 region before the XAU/USD eventually drops to challenge monthly swing lows, around the $1,750 region.