Gold Price Forecast: XAU/USD buyers needs validation from key resistance near $1,940

Gold price is making another recovery attempt toward the $1,940 level early Tuesday, as the United States Dollar (USD) is seeing a fresh selling wave amid an improvement in risk sentiment and steady US Treasury bond yields.

United States economic data, ECB-speak in focus

Gold price defended mild bids but stalled its recovery momentum on Monday, as the sharp rebound in the US Treasury bond yields offset a broadly defensive US Dollar even as markets remained risk-averse. Concerns about political turmoil in Russia boosted the safe-haven flows into the US government bonds, sending the US Treasury bond yields tumbling across the curve. The benchmark 10-year US Treasury bond yields dipped to three-week lows near 3.67% before staging a solid comeback to near 3.74%, as the hawkish US Federal Reserve (Fed) outlook continues to underpin. Therefore, the upside in the Gold price remained capped, despite a broad retreat in the US Dollar.

Investors took profits on their USD longs after the previous week’s staggering recovery and ahead of a fresh batch of top-tier United States economic data, including a key inflation gauge, Durable Goods and the University of Michigan's Consumer Sentiment Index. Further, a speech from Federal Reserve Chair Jerome Powell at the European Central Bank (ECB) Forum in Sintra will also hold the key for the market’s repricing of the Fed’s rate hike expectations.

On Monday, New York Fed President John Williams underscored the importance of restoring price stability while warning of unwanted economic pain due to the prolonged usage of the rates policy. Markets continue pricing about a 75% chance of a Fed rate hike next month.

Meanwhile, mounting global recession fears and heightened hopes for Chinese stimulus to boost economic growth support the Gold price. Markets expect China's top gold consumer to roll out stimulus measures after a regular meeting of the Communist Party's political bureau in July.

Gold traders will also look forward to a slew of ECB policymakers taking up the rostrum at the central bank forum in Sintra on Tuesday, touching on various topics such as monetary policy normalization and inflation.

Gold price technical analysis: Daily chart

Technically, nothing has changed for the Gold price, as it keeps its recovery mode intact between two key levels. The upside remains capped by the critical horizontal 100-Daily Moving Average (DMA) at $1,943, while the March 16 low of $1,908 safeguards Gold buyers.

However, with the 14-day Relative Strength Index (RSI) stationed well below the midline, the Gold price remains exposed to downside risks in the near term.

Further, an impending Bear Cross, with the downward-sloping 21 DMA set to cut the 100 DMA from above, adds credence to the bearish bias.  

Therefore, the Gold price could challenge the key support of the March 17 low at $1,918 if buyers lose the recovery momentum. The three-month low of $1,911 and the March 16 low of $1,908 will be tested, below which floors will open toward the $1,900 threshold.

On the upside, immediate resistance is seen near the $1,935 region, above which the 100 DMA at $1,943 will be a tough nut to crack for Gold buyers. A firm break above the latter will threaten the bearish 21 DMA at $1,948.