Gold Price Forecast: XAU/USD presents ‘buy-the-dip’ trade to kick off a big week

Gold price clings to the 100 DMA support after Friday’s extended sell-off.
US Dollar consolidates weekly gains, biding time ahead of key central banks' decisions.
Gold price could rebound toward $1,970, but United States data holds the key.

Dhwani Mehta FXStreet

Gold price is nursing losses while defending $1,950 early Monday, pausing last week’s three-day downtrend. The United States Dollar (USD) has entered a phase of upside consolidation amid a cautious market mood and steady US Treasury bond yields, as investors stay on tenterhooks bracing for a big central banks’ week.

Gold price looks to United States PMIs for fresh impetus

Starting an action-packed week of earnings and central bank meetings, Gold price is treading water as traders refrain from placing fresh directional bets on the bright metal. On one side, expectations that the Fed and the European Central Bank (ECB) are likely to call an end of the tightening cycle could keep the sentiment around the non-yielding Gold price lifted. That leaves room for a hawkish surprise from the Fed and the ECB, leaving Gold buyers on edge.

Meanwhile, the US Treasury bond yields are trading listlessly, awaiting fresh cues on the Fed’s policy course, keeping the downside cushioned in Gold price. Traders await second-quarter advance US GDP data on Thursday, followed by June's Personal Consumption Expenditures (PCE) index figures on Friday. Markets will also closely eye the US earnings reports for their impact on risk sentiment, eventually influencing the US Dollar and Gold price.

The immediate focus remains on the global preliminary Manufacturing and Services PMIs for fresh hints on a likely recession. Eurozone and US PMI reports will stand out and could reinforce US Dollar bulls should the data disappoint markets and trigger broad risk aversion. Mounting recession fears globally could also help put a floor under the traditional safe-haven Gold price. On the other hand, upbeat US S&P Global PMIs are unlikely to change the dovish Fed outlook, as the Fed's odds of a September rate pause continue to hold above 80%.

Gold price technical analysis: Daily chart

Technically, the Gold price outlook remains more or less the same, with the upside potential intact, as the 14-day Relative Strength Index (RSI) continues to hold well above the midline.

Therefore, fresh declines in Gold price are likely to be seen as an excellent dip-buying opportunity for Gold traders. The critical buying area is just above the $1,950 mark, where the upward-sloping 100-Daily Moverage Average (DMA) aligns.

Daily closing below the latter is needed to confirm the extension of the recent correction from two-month highs of $1,988 set last week. Should the selling momentum gather steam, the 50 and 20 DMAs will be challenged at $1,948 and $1,938, respectively.

On the flip side, a strong hurdle is seen at the $1,970 support-turned-resistance, above which a retest of the May 24 high of $1,985 will be on the cards. The $2,000 threshold will be back on Gold buyers’ radars on acceptance above the latter.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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