Gold Price Forecast as the DXY and VIX index Retreats

Gold price continued soaring this week as the US dollar and the VIX index came under intense pressure. The XAU/USD was trading at 1,770, the highest point since August 17 of this year. It has jumped by over 9.65% from its lowest level this year while the fear and greed index rose to 65.

Fear and greed index rises

Gold price has performed relatively well in the past few days as the US dollar index has plunged. After soaring to a high of $115 in September, the DXY index has pulled back to about $106. The dollar sell-off intensified after last week’s American inflation data. According to the BLS, the headline CPI declined from 8.3% in September to 7.7% in October.

Since then, most analysts believe that the Federal Reserve will start its interest rate pivot. They expect that the bank will hike rates by 0.50% in December after hiking by 0.75% in the past four straight months. This view was confirmed by several Fed officials, including the vice chair, Lael Brainard. Others like Mary Daly and Loretta Mester have said that they expect the bank to slow the pace of hikes.

In the aftermath of these inflation numbers, the fear and greed index jumped to 64, which is the greed area. Similarly, American stocks continued their recovery, with the Dow Jones and S&P 500 rising by more than 10% from its lowest level this year. The US dollar and the VIX index have all retreated. Gold has an inverse relationship with the DXY.

Gold price forecast

The 4H chart shows that the XAU/USD price has been in a strong bullish trend in the past few weeks. It has managed to rise by almost 10% from its lowest level in September. Gold soared above the important resistance level at $1,730, the highest level on October 4.

The bull run is being supported by the 25-day and 50-day moving averages while the Relative Strength Index (RSI) and the Stochastic Oscillator moved above the overbought levels. Therefore, the bullish trend will likely continue as buyers target the next key level at $1,850. A drop below the support at $1,752 will invalidate the bullish view.