Gold Price Forecast: Will XAU/USD find acceptance above 23.6% Fibo resistance?

Gold price almost tested the $1,730 round figure amid the renewed buying seen in the Asian session this Tuesday. However, the further upside remains capped as investors refrain from placing aggressive bets on the bullion ahead of the US ISM Services PMI data. The US dollar remains in a corrective mode as risk flows return on optimism surrounding China’s stimulus and firmer oil prices. Fading political uncertainty in the UK after Liz Truss was announced as the new prime minister also calmed nerves. However, global recession fears continue to loom amid the ongoing European energy crisis, with the Russian oil giant Gazprom saying that Nord Stream 1 pipeline will not be launched until Siemens energy replaces faulty equipment. Meanwhile, the hawkish Fed rate hike bets this month keep the demand for the US dollar afloat amid the renewed uptick in the Treasury yields. A cautious market mood combined with aggressive tightening expectations from the Fed and ECB restricts the gold price recovery.

Markets now look forward to the Services PMIs from the US, as S&P Global and ISM will publish the data later in the NA session. The headline ISM Services PMI will hog as much limelight as the new orders sub-index for fresh cues on the strength of the US economy, especially after the jobs data came in mixed and the July inflation data showed the first signs of peak inflation. As Fed remains data-dependent, each data point will be closely examined for the September rate hike expectations. Markets are wagering a 60% chance of a 75 bps rate hike later this month, slightly up from around 55% seen a day ago.

Also read: ISM Services PMI Preview: High bar to help dollar bears pass through and take over

Amidst the US and Canadian holiday-thinned trading on Monday, XAU/USD closed almost unchanged on the day, stalling Friday’s solid recovery. The greenback witnessed good two-way trades amid light trading, as it hit fresh 20-year highs above 110.00 against its major peers before reversing sharply to near 109.50. The pullback in the dollar capped gold’s renewed downside while recession fears also support XAU bulls. The inflation hedge, gold, also cheered the inflation outlook for inflation, in the wake of surging energy costs, which outweighed expectations of a supersized ECB rate hike this week.

Gold price technical outlook: Daily chart

Gold bulls are trying their luck once again, as they recapture the $1,716 barrier, which is the 23.6% Fibonacci Retracement level of the latest decline from the August 10 peak of $1,808.

Failure to resist above the latter will reinforce selling interests, calling for a revisit to Monday’s low of $1,708. The next cushion is seen at the $1,700 mark, below which the six-week low of $1,689 could be tested again.

The 21-Daily Moving Average (DMA) is on the verge of crossing the 50 DMA for the downside, signalling a bear cross while warranting caution for bulls.

However, the 14-day Relative Strength Index (RSI) is edging higher towards the midline, justifying the latest leg north in the bright metal.

If the recovery momentum extends, bulls will challenge the 38.2% Fib level at $1,734 on a sustained move above the daily high of $1,727 and the $1,730 round figure.