Gold Price Forecast: XAU/USD upside appears limited until 21 DMA resistance holds

• Gold price consolidates recovery gains as dovish Fedspeak downs the US Dollar.
• Falling US Treasury bond yields help Gold price stay afloat.
• Gold price continues to test the key 21 DMA, as the focus shifts to US inflation data.

Gold price is struggling to extend last week’s recovery gains while keeping its range below the $1,930 threshold so far this Tuesday. Gold price witnesses a bull-bear tug-of-war, as markets await the United States Consumer Price Index (CPI) for a fresh directional move.  

Federal Reserve officials signal dovishness

The United States Dollar (USD) reversed its recovery and resumed its sell-off, alongside the US Treasury bond yields, in American trading on Monday after Federal Reserve (Fed) took up the rostrum and signaled that the US central bank is nearing an end to its tightening cycle even as they cited the need to raise interest rates further to bring down inflation.

San Francisco Fed President Mary Daly said that while the risks of doing too little are still greater than those of overdoing it on rate hikes, the two sides are getting into better balance as the Fed nears "the last part" of its hiking cycle. Meanwhile, Fed Vice Chair for Supervision Michael Barr said, "We still have a bit of work to do," adding that "I'll just say for myself, I think we're close." Atlanta Fed President Raphael Bostic, speaking at yet another event on Monday, repeated his view, "my baseline is that we should stay at this level for the rest of the year."

The US Dollar Index tumbled to over two-week lows below 102.00 while the benchmark 10-year Treasury bond yields pulled back sharply from eight-month highs to breach the 4.0% level. In light of this, Gold price erased losses and rebound firmly toward $1,930 once again.

In the first half of Monday, the US Dollar attempted a bounce on Chinese growth concerns after disinflation in China gathered pace in June. The Greenback recovered a part of Friday’s decline, induced by weak US labor market data, which showed the US economy added 209K jobs in June vs. 225K expected and the downwardly revised previous reading of 306K. The Average Hourly Earnings rose 4.4 annually while the Unemployment Rate in the US ticked lower to 3.6% in the reported period.

Looking ahead, all eyes remain on Wednesday’s critical United States Consumer Price Index (CPI) data release for fresh cues on the Fed’s rate hike path. In the meantime, Fedspeak will continue to drive the sentiment around the US Dollar and the Gold price. The US economic calendar is devoid of any top-tier data on Tuesday, therefore, speeches from the Fed policymakers will be closely followed.

Expectations that inflationary pressures in the United States are cooling could continue to act as a headwind from the US Dollar, keeping the downside cushioned under Gold price. According to the latest survey published by the New York Fed on the state of consumer expectations in June, near-term inflation expectations dropped to their lowest level since April 2021.

Gold price technical analysis: Daily chart

A bullish wedge remains in play for Gold price, motivating buyers to remain in the game so far this week.  

However, the bearish 21-Daily Moving Average (DMA) at $1,928 continues to guard the upside.

That said, the 14-day Relative Strength Index (RSI) is sitting just below the midline, checking the bullish attempts in Gold price.

A sustained break above the 21 DMA barrier for the Gold price rebound to gather momentum, which could fuel a run toward the downward-sloping 50 DMA at $1,959. Ahead of that, Gold buyers will face powerful hurdle at the mildly bullish 100 DMA at $1,949.

On the downside, the immediate support awaits at wedge resistance-turned-support, now at $1,908. The $1,900 key level will be next on their radars. Further south, the three-month low of $1,893 could offer some support to Gold optimists.