Gold Price Forecast: Risks appear skewed in favor of XAU/USD bears, NFP awaited

• Cautious market mood and US dollar’s strength keeps gold price side-lined.
• Investors digest hawkish Fedspeak amid mixed US data, ahead of key NFP.
• Gold’s daily setup suggests choppy to range-bound trading.

Gold price witnessed wild swings on Wednesday and snapped its three-day losing streak, ending the day with modest gains at $1812. In the first half of the day, gold price caught a fresh bid wave and rallied to four-day highs of $1831.81 as the US dollar slipped on a disappointing ADP jobs report. The US private sector added 330,000 jobs in July, well below expectations.

However, the greenback staged a V-shaped recovery after the US ISM Services PMI jumped to a fresh record high of 64.1 in July vs. 60.4 expected. The resurgent dollar’s demand was also backed by Fed Vice-Chair Richard Clarida’s hawkish comments. Clarida said that the central bank is likely to hit its economic targets by the end of next year and start raising rates again in 2023. He also said that the Fed’s tapering could start as early as the end of this year. Treasury yields spiked alongside the dollar and dragged gold price sharply lower towards its recent range lows. Although, the Fed’s hawkish expectations-led drop in the US stocks helped gold price to limit its declines.

Gold price is trading subdued at lower levels on Bank of England’s (BOE) Super Thursday, clinging onto key support amid ongoing coronavirus concerns, China crackdown woes and hawkish Fedspeak. Immediate focus now remains on the BOE monetary policy announcements, with the central bank likely to stand pat but may offer hints towards a potential tapering of its bond-buying programme amid concerns over rising inflation. Any hawkish tilt from the BOE could dent the sentiment on the global stocks, lifting the dollar further, in turn, negatively impacting gold. Also, of note remains the US Jobless Claims and Fed official Waller’s speech for fresh incentives on gold price action. However, Friday’s US NFP release will set the tone for the market and gold’s direction.

Gold Price Chart - Technical outlook

Gold: Daily chart

The daily technical chart for gold price shows a downside consolidative mode is underway, as bears cling onto the critical 21-Daily Moving Average (DMA) at $1811. Note that gold price has failed to close below the daily candlestick since July 27.

Meanwhile, the 200-DMA at $1819 continues to challenge the bullish commitments. Despite Wednesday’s spike, gold price failed to find acceptance above the latter and turned south, keeping the bears hopeful.

The 14-day Relative Strength Index (RSI) holds steady at the midline, suggesting that gold traders remain indecisive of the next direction in prices.  

Although, the risks appear to the downside for gold price amid a looming death cross on the daily time frame. The 50-DMA is fast approaching the 200-DMA, looking to pierce through the latter from above.

A sustained break below the 21-DMA support could expose the ascending 100-DMA at $1804 and the psychological $1800 mark.

Further south, the range lows around $1790 could be put at risk if the selling pressure intensifies.

Alternatively, recapturing the 200-DMA convincingly is likely to prompt a retest of the bearish 50-DMA at $1822.

Buyers will seek fresh entries to challenge Wednesday’s high en-route the $1840 round number.