Gold price outlook: levels to watch amid an improved risk appetite

Gold price is hovering around $1780 amid a decline in the value of the US dollar. The drop of Treasury yields has further boosted the precious metal.

Weakening US dollar

Gold price gains on Wednesday are largely founded on the decline in the value of the US dollar. The inverse correlation between precious metals and the greenback means that weakness in the dollar creates a bullish environment for gold. At the time of writing, the dollar index was down by 0.07% at 93.71.

An improvement of the risk sentiment has lowered the currency’s safe-haven appeal. On the same note, the shares market is rallying with Dow Jones at its highest level since late-August. The tech-heavy S&P 500 is also at an over one-month high.

The decline in US bond yields has further boosted gold price. The benchmark 10-year Treasury yields is at 1.64 after falling from its intraday high of 1.67. evidently, investors have lessened their bets of the Federal Reserve hiking interest rates by next year.

Despite the decline in the value of the US dollar, gold’s upward movement will likely be limited. This is for as long as the dollar index’s support level of $93.50 remains steady.  

Gold price technical outlook

After dropping to an intraday low of 1,767.03 on Tuesday, the precious metal has rebounded by over 1%. Subsequently, it is trading above 1,780, which has been a crucial level for gold since the beginning of the year.

At the time of writing, gold price was up by 0.99% at 1,787.03. Notably, the metal has been trading around 1,760 for the better part of October. As such, the surge to the current zone has investors keen on the underlying drivers and its next move.

On a two-hour chart, it is trading above the 25 and 50-day exponential moving averages. While these technical indicators signal further gains for the commodity, I hold the opinion that its upside potential is rather limited. This assertion is largely founded on the fundamentals.

In the near term, I expect 1,780 to remain a crucial support level for gold price. It will likely experience resistance at 1,789.00. The bulls may manage to push it higher to 1,796.57 before pulling back. On the flip side, it may drop below 1,780 to find support along the 25-day EMA at 1,775.05.