Fundamental view:

Gold has struggled against the greenback during the trading course of the week. The US dollar came back in demand with the hawkish Fed expectations. Market now expects that the Fed will be forced to tighten its monetary policy sooner rather than later to contain stubbornly high inflation. This in turn weighs on the yellow metal demand.

”Gold prices are struggling as market pricing for Fed hikes grows more aggressive, as traders pencil in higher odds of a May lift-off.” analysts at TD Securities explained. 

Elsewhere, Mixed headlines on the Omicron variant of the coronavirus kept a lid on the recent optimism. BioNTech and Pfizer said on Wednesday that a three-shot course of their COVID-19 vaccine was able to neutralise the Omicron variant in a laboratory test. But the fears of the Omicron could be linked to the Japanese study saying Omicron is four-time more transmissible than the other covid strains.  

It has to be noted that US support to Ukraine and major setbacks for the Beijing Olympics 2022 join the Washington-Israel talks to convey Tehran’s diplomacy also underpins the risk-off mood.

Fitch termed China’s Evergrande as “restricted default” and pushed the People’s Bank of China (PBOC) to raise the reserve requirement ratio (RRR) on banks’ foreign currency holdings also added on the risk –off mood in the market. Yellow metal slides amidst all the catalysts favoring the US dollar.         

The major economic events deciding the movement of the pair in the next week are Retail Sales monthly report, EIA Crude Oil Stocks Change, Fed Interest Rate Decision at Dec 15, Initial Jobless Claims, Fed Industrial Production monthly report at Dec 16 and Fed Governor Waller Speech at Dec 17 for US.

XAU/USD Weekly outlook:

Technical View:

Last week’s high was 0.87% lower than the previous week. Maintaining high at 1793.1 and low at 1769.9 showed a movement of 232 pips.

In the upcoming week we expect XAU/USD to show a bearish trend. The Instrument is trading below the 200 Simple Moving Average and the MACD trades to the nearly neutral. Should 1770.5 proves to be unreliable support then the pair may fall further to 1758.6 and 1747.3 respectively whereas a solid breakout above 1793.7 will open a clear path upward to 1805.0 and then will further raise up to 1816.9. In H4 chart bearish butterfly pattern favors prospects of a bearish trend. Also to be noted bearish harami formation exerts the expectation of downtrend for the pair.