Gold Price Forecast: XAU/USD struggles near $1,760 on sour sentiment ahead of US PMIs, NFP
- Gold price snaps three-day uptrend as it seesaws around monthly high, recently off intraday low.
- Risk appetite dwindles amid headlines surrounding China, pre-NFP anxiety.
- Recession fears, Fedspeak also contribute to the market’s indecision.
- US ISM Manufacturing PMI could decorate calendar ahead of the key Services PMI, jobs report for July.
Gold price (XAU/USD) remains pressured despite bouncing off the intraday low, down for the first time in four days, as buyers take a breather around the one-month peak. That said, the yellow metal recently rises to $1,763, after refreshing the intraday low to $1,760 during Monday’s Asian session.
The quote’s recent weakness could be attributed to the market’s cautious sentiment ahead of the key US employment report for July, as well as due to the fresh Sino-American tussles. Additionally, Friday’s upbeat prints of the Fed’s preferred inflation gauge and hawkish Fedspeak also weigh on the XAU/USD prices.
US House Speaker Nancy Pelosi begins her Asia visit but the schedule doesn’t mention her Taiwan visit The reason could be attributed to Beijing’s warnings. “Six people familiar with the Chinese warnings said they were significantly stronger than the threats that Beijing has made in the past when it was unhappy with US actions or policy on Taiwan,” said the Financial Times (FT).
That said, the US Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, rose to 4.8% YoY for June versus 4.7% prior. Following that, Minneapolis Fed President Niel Kashkari mentioned to the New York Times (NYT) that the Fed is still a long way away from backing off rate hikes. The policymaker added, “Hiking rates by half a point at coming Fed meetings seems reasonable to me.”
It should be noted, however, that the recent fall in the US Treasury yields and firmer equities appear to have weighed on the US dollar, which in turn favors the gold price. Also, US Federal Reserve (Fed) Chairman Jerome Powell’s comments highlighting data-dependency and neutral rates joined the “technical recession” of the US to underpin the gold’s recovery in the last two weeks.
Amid these plays, the S&P 500 Futures print mild losses but the US Treasury yields consolidate a recent fall around 2.66%, up two basis points (bps).
Moving on, US ISM Manufacturing PMI for July, expected at 52 versus 53 prior, could direct immediate XAU/USD moves ahead of the US ISM Services PMI for the said month. Also important will be the Fedspeak and the headlines surrounding China. However, major attention will be given to Friday’s US Nonfarm Payrolls (NFP) amid calls for neutral rates and economic slowdown.
Technical analysis
The overbought RSI (14) appeared to have triggered the Gold price pullback after the previous week’s multiple failures to cross the 200-SMA.
However, a successful break of the downward sloping trend line from June 12, around $1,746 by the press time, keeps XAU/USD buyers hopeful.
Even if the metal prices drop below $1,746, a convergence of the 50-SMA and one-week-old support line, near $1,727, will be a tough nut to crack for short-term bears.
Alternatively, gold price run-up beyond the 200-SMA level surrounding $1,770 needs validation from July 01 low near $1,785 to convince buyers.
Following that, the 61.8% Fibonacci retracement of the June-July downturn, near $1,805, could challenge the XAU/USD bulls.
Overall, gold is likely to witness a pullback but the bears need to remain cautious until witnessing a sustained break of the $1,727 support.
Gold: Four-hour chart
Trend: Pullback expected