Gold Price Forecast: Will XAU/USD rebound seek acceptance above 100 DMA?

Gold price is holding strong gains above $1,950, rebounding firmly from six-day lows early Tuesday. The United States Dollar (USD) uptrend loses traction, as risk sentiment remains in a sweeter spot amid hopes of China’s stimulus package.  

China stimulus pledge revives Gold price

On Monday, China’s top leaders pledged to step up policy support for the economy amid a flagging post-COVID recovery, with Chinese state media speculating rate cuts, tax cuts and fee reductions by the authorities. Stocks in Mainland China and Hong Kong surged on stimulus optimism, which helped stalled the latest upsurge in the US Dollar across its major peers.

The positive shift in risk sentiment is dragging the safe-haven US Dollar broadly lower, benefiting the USD-denominated Gold price. The renewed weakness in the US Treasury bond yield across the curve is also adding to the downbeat tone around the Greenback. In the day ahead, should Chinese authorities unveil more stimulus measures to stimulate growth, the US Dollar is likely to extend the corrective move lower, as risk flows gather steam. Gold price, therefore, could sustain its bounce ahead of the mid-tier United States Conference Board Consumer Sentiment data.

On disappointing US sentiment data, the US Dollar could see some fresh selling interest, as the data would reinforce dovish US Federal Reserve (Fed) expectations. Markets are pricing the expected July Fed rate hike to be the last one for this year.

At the start of the week on Monday, Gold price failed to hold its rebound and returned to the red after the ongoing US Dollar advance gathered strength on mounting fears over a potential recession globally after the Eurozone and German preliminary business PMI reports pointed to an extended downturn. The S&P Global US preliminary Composite PMI for July also disappointed markets and added to the growth concerns.

Gold price technical analysis: Daily chart

As explained here, Gold price is witnessing a ‘dip-buying’ trade early Tuesday, having found fresh buyers just above the critical support area of $1,950.

Gold buyers need acceptance above the 100-Daily Moving Average (DMA) support-turned-resistance at $1,963 on a daily closing basis to extend the rebound from six-day lows.

The next upside hurdle aligns at the $1,970 static resistance, above which the May 24 high of $1,985 could come into play. The $2,000 threshold will remain next on Gold buyers’ radars.

Adding credence to the bullish potential, the 14-day Relative Strength Index (RSI) has turned higher while above the midline, pointing toward the overbought region.

On the downside, strong support awaits at the bearish 50 DMA of $1,947. A sustained break below the latter will challenge bullish commitments at the upward-sloping 21 DMA of $1,940.

If the selling pressure picks up pace, then Gold price could tumble toward the $1,930 round number.