• Gold Price defends minor recovery gains above $1,800 amid US holiday.
  • Growth fears strengthen the US dollar, despite the recent sell-off in yields.
  • XAUUSD awaits death cross confirmation to resume the downtrend below $1,800.  

Gold Price extended its previous sell-off and hit over five-month lows at $1,785, following a firm break below the critical $1,800 level. Although bulls fought back control and drove the rates back above the latter, in an impressive turnaround to book the third straight weekly loss. The US dollar continued to move towards the two-decade highs of 105.79 against its major peers, as the buck remained in a win-win situation, in the face of an aggressive Fed tightening stance and growing economic slowdown concerns. Despite softening US PCE Core inflation, a slump in the ISM Manufacturing PMI to 53.0 in June, revived recession fears. However, US Treasury yields kept falling and Wall Street indices recovered a part of their weekly losses, prompting gold bulls to stage a solid comeback. The end-of-week flows also helped the bright metal survive the early turmoil, as investors closed out their positions heading into a long weekend break. The US stocks and bond markets will remain closed on Monday on account of Independence Day.

Amid holiday-thinned light trading, gold price is consolidating its recovery above $1,800, with a bounce in the US dollar capping the upside. Speculative interest continues to remain short on the bullion amidst markets wagering of a super-sized 75 bps Fed rate hike this month. Although, the FOMC June meeting’s minutes, due for release on Wednesday, will shed more light on the Fed’s rate hike, as well as, the inflation outlook, as recession risks mount. Meanwhile, investors digest China’s renewed covid concerns, which reinforced the return of risk-off flows this Monday. The ongoing downtrend in the yields could lend support to gold price, as heightening growth fears push investors to find solace in the US bond markets.

Gold Price Chart: Daily

As observed on the daily chart, gold price is faltering on its recovery momentum, as the 50-Daily Moving Average (DMA) is crossing the 200 DMA for the downside. If the bearish crossover is confirmed on a daily closing basis, it would validate a death cross, suggesting a beginning of a new downtrend in the yellow metal.

The 14-day Relative Strength Index (RSI) remains flatlined below the 50.00 level, backing the near-term downside bias.

A daily candlestick close below the $1,800 mark will open up additional declines towards the critical horizontal support, now aligned at $1,785. The next downside target is seen at $1,780 the figure.

On the flip side, the rebound in XAUUSD could face strong offers at the falling trendline resistance at $1,822, above which bulls will call for a test of the bearish 21 DMA at $1,832 should the $1,830 level give way.

All in all, the path of least resistance appears to the downside for gold price, with every attempt to the upside seen as a ‘good selling opportunity’.

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