Gold Price Forecast: XAU/USD attempts another run toward $2,000

Gold price is seeing fresh demand early Tuesday, having held onto its tight corrective range at the start of the week on Monday. Gold price booked the first daily loss in five, although the pullback was capped by a sharp retracement in the US Treasury bond yields, which dragged the United States Dollar (USD) lower.

Gold price eyes Global PMIs and Middle East conflict  

The rally in the US Treasury bond yields took a breather, correcting sharply from fresh 16-year highs, as experts viewed that the recent historic rout in the bond market was excessive. The pullback in the US Treasury bond yields was triggered after the benchmark 10-year rates failed to resist above the 5.0% key level. The 10-year US Treasury bond yields rallied as much as 11 basis points (bps) to hit 5.02%, the highest since 2007, before erasing its increase and falling as low as 4.83%.

Additionally, industry experts note that surging Oil prices, renewed geopolitical tensions and the Fed’s view of higher interest rates for longer pose a threat to the global economic outlook, reviving a flight to safety in the US bonds.

The much-needed turnaround in the US bond market weighed on the US Dollar while offering some relief to global stock markets. The US stock indices ended in the red, however, off their daily lows. In light of these, Gold price received much-needed support, capping its correction from five-month highs of 1,997.

Markets have turned a bit optimistic in early trading on Tuesday, as there are growing calls within Israel to reconsider the scope of a ground invasion of Gaza that had been expected any day. Further, investors remain hopeful of upbeat earnings reports from the US tech giants - Apple Inc., Microsoft, Alphabet Inc., Amazon.com Inc. and Nvidia Corp.

Also, encouraging discussions between the US and China at their first meeting of the economic working group has also added to the improved market sentiment, keeping the safe-haven US Dollar undermined while the Gold price catches a fresh bid to challenge the $1,980 barrier, at the time of writing.

Amid renewed concerns over the global economy, Tuesday’s business PMI reports from the Eurozone, the UK and the US will be closely scrutinized for fresh cues. Should the Middle East conflict escalate and PMIs disappoint, a fresh round of risk aversion and the US Dollar buying cannot be ruled out. In such a case, Gold price could fall back in the red, although the downside could be checked by the likely extension of the US Treasury bond yields retreat.  

On the other side, calm on the Middle East front could keep the downside intact in the US Dollar, motivating Gold buyers to once again target the key $2,000 threshold.  

Gold price technical analysis: Daily chart

Gold price continues to remain a ‘buy-the-dip’ trade, as the 14-day Relative Strength Index (RSI) indicator still teases the overbought region, currently at 69.20.

The immediate resistance is seen at the previous day’s high of $1,983, above which the July 20 high of $1,988 will be eyed. Gold buyers will then aim for the five-month highs of $1,997 en-route the $2,000 barrier.

Alternatively, if the correction from multi-month highs resumes, Gold sellers would need a sustained break of the previous day’s low of $1,963 to test the $1,950 psychological level.

The last line of defense for Gold buyers is aligned at the October 19 low of $1,945.