Gold Price Forecast: XAU/USD confirms a bearish breakdown, remains vulnerable

• Gold added to last week’s post-NFP losses and dived to multi-month lows on Monday.
• Increasing bets for an earlier Fed taper, rallying US bond yields weighed on the metal.
• COVID-19 jitters assisted the safe-haven commodity to trim a part of its intraday losses.

Gold extended its post-NFP slump and witnessed aggressive selling during the early part of the Asian session on Monday. Friday's stronger-than-expected US monthly jobs report fueled fears that the Fed could start tapering its asset purchases later this year, which, in turn, weighed heavily on the non-yielding yellow metal. The headline print showed that the US economy added 943K new jobs in July, surpassing even the most optimistic estimates. Adding to this, the previous month's reading was also revised higher to 938K from 850K reported earlier.

Further details revealed that the US unemployment rate dropped from 5.9% in June to 5.4% during the reported month, beating expectations of 5.7%. There was also good news on the wage front as average hourly earnings surged 4.0% YoY, marking another step toward the Fed's goal of substantial further progress in the labor market recovery. Nevertheless, the report forced investors to bring forward the likely timing for the Fed policy tightening, as soon as early 2020. This was evident from a sharp surge in the US Treasury bond yields.

In fact, the yield on the benchmark 10-year US government bond jumped back above the 1.30% threshold and provided a strong boost to the US dollar, which further undermined the dollar-denominated commodity. That said, worries that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery extended some support to the traditional safe-haven XAU/USD. Apart from this, extremely oversold conditions on intraday charts assisted the metal to trim a part of its intraday losses.

Moving ahead, there isn't any major market-moving economic data due for release from the US on Monday. Hence, the US bond yields will continue to play a key role in influencing the USD price dynamics. Traders will further take cues from developments surrounding the coronavirus saga and the broader market risk sentiment. This, along with scheduled speeches by Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin, will also be looked upon for some meaningful trading opportunities later during the early North American session.

Short-term technical outlook

From a technical perspective, repeated failures near the $1,832-34 region constituted the formation of bearish multiple tops on the daily chart. A sustained break below June monthly swing lows support, around the $1,760-50 horizontal zone, confirmed a fresh bearish breakdown and has set the stage for further losses. Hence, any further recovery might still be seen as a selling opportunity near the mentioned support breakpoint. This, in turn, should cap the XAU/USD near the $1,780 region, which might now act as a key pivotal point for short-term traders.

On the flip side, weakness back below the $1,730 level will reaffirm the negative outlook and accelerate the fall back towards the $1,700 round figure. This is followed by the Asian session lows, around the $1,687-86 region, below which bears might aim to challenge YTD lows, around the $1,677-76 area. Some follow-through selling should pave the way for a further near-term depreciating move.