Gold Price Forecast: For how long will 100 DMA guard the XAU/USD downside?

Gold price is consolidating in multi-day-day lows while hovering around the $1,950 level early Tuesday. Hawkish US Federal Reserve (Fed) rate hike expectations continue to provide legs to the United States Dollar (USD) recovery alongside the uptrend in the US Treasury bond yields.  

United States Dollar finds its footing, Fed’s Powell holds the key

Gold price kicked off the week on the wrong footing, now extending the bearish momentum into the third day in a row, as the US Dollar is finding support from increased bets of a July Federal Reserve rate hike, currently standing at 75%, according to the CME Group’s FedWatch Tool. The US Treasury bond yields are also capitalizing on hawkish Fed bets, with the benchmark 10-year US Treasury bond yields flirting with the 3.80% level, up 0.75% so far.

Further, markets remain risk averse as investors fret whether the latest monetary policy easing by the People’s Bank of China (PBOC) will help revive the post-pandemic economic recovery in the world’s second-biggest economy. The Chinese central bank slashed the one-year and five-year Loan Prime Rate (LPR) by ten bps on Tuesday after cutting the rates on its Medium-term Lending Facility (MLF) last week.

China’s growth worries, combined with the hawkish Fed outlook, spook investors as they seek safety in the US Dollar at the expense of the USD-denominated Gold price. Additionally, the dwindling Chinese recovery raises concerns over the demand for Gold from the world’s largest Gold consumer, collaborating with the downside in the Gold price.

On Monday, the Juneteenth holiday in the United States left the US Dollar buyers in control amid anxiety ahead of Tuesday’s Chinese interest rates decision. Investors also assessed the Fed rate hike prospects following Friday’s hawkish commentaries from several Fed policymakers as they returned from the Fed’s ‘blackout period.’

All eyes now remain on Fed Chair Jerome Powell’s testimony about the Semi-Annual Monetary Policy Report before the House Financial Services Committee and the Senate Banking Committee later this week. As the Fed’s Monetary Policy Report was published last Friday, the focus will remain on Powell’s Q&A session for insights into the Bank’s policy, which could offer a fresh trading direction to Gold price.

Gold price technical analysis: Daily chart

Technically, nothing has changed for the Gold price on Tuesday, as it remains vulnerable after having failed to resist above the critical bearish 21-Daily Moving Average (DMA) at $1,955.

Meanwhile, Gold buyers continue to find support at the flattish 100 DMA at $1,943. Therefore, the range play will likely extend ahead of the mid-tier US Housing Starts and Building Permits data. Also, the Fedspeak will be closely scrutinized.

With the 14-day Relative Strength Index (RSI) trending below the midline, risks remain skewed to the downside for Gold price.

A sustained move above the 21 DMA resistance-turned-support is needed to take on the previous week’s high at $1,971. Further up, the mildly bearish 50 DMA at $1,985 will come into play.

On the other hand, if Gold sellers find a strong foothold below the powerful horizontal 100 DMA support at $1,943, then a fresh downswing toward the previous week’s low of $1,925 will be in the offing.