Gold Price Forecast: XAU/USD could correct toward $1,940 amid a Bear Cross

Gold price is holding its corrective downside intact near $1,950 at the start of the week on Monday, having retreated from two-month highs on Friday. The United States Dollar (USD is clinging to recovery gains, in tandem with the US Treasury bond yields, awaiting top-tier US economic data amid the Federal Reserve (Fed)  ‘blackout period’ ahead of the July 25-26 FOMC meeting.

Focus on Tuesday’s US Retail Sales data

Above-forecasts US University of Michigan (UoM) Preliminary Consumer Sentiment and Inflation Expectations data failed to impress US Dollar bulls further, as they succumbed to the end-of-the-week flows and Greenback unwinding following a long streak of steep losses. Softer US inflation data and dovish Federal Reserve commentary knocked down the US Dollar to 15-month lows against its major peers, driving Gold price to the highest level in two months, near $1,965.

Markets began pricing a Fed rate hike pause for the rest of the year after the 25 basis points (bps) July rate hike, suggesting that the Fed is close to the end of its tightening cycle. The US Treasury bond yields also witnessed four straight days of declines amid dovish Fed expectations, boosting the non-yielding Gold price all through the week.

In Monday’s trading, Gold price is licking its wounds, as the US Dollar is consolidating Friday’s rebound, finding support from the Chinese data-led risk-off market profile. China’s growth and activity numbers came in mixed and rekindled China's slowdown concerns.

China’s GDP expanded 6.3% in the second quarter, accelerating from 4.5% in the first three months of the year, but the rate was below the forecast for growth of 7.3%. Meanwhile, the country’s Retail Sales missed estimates with a 3.1% increase in June. Industrial Production, however, came in at 4.4% in the reported period vs. 2.7% expected. However, China’s frail GDP growth has fanned expectations of more policy stimulus from the People’s Bank of China (PBOC), limiting the uptick in the US Dollar.

Should risk-off flows gather steam in the day ahead, the Greenback bulls will extend the recovery, dragging Gold price back below the $1,950 level. Markets are set to remain cautious ahead of Tuesday’s Retail Sales data from the United States and Q2 corporate earnings reports due later this week. US Retail Sales are seen rising 0.5% MoM in June vs. +0.3% reported in May. Core Retail Sales (ex-Autos) for June are seen +0.3% MoM, compared with +0.1% previous.

Gold price technical analysis: Daily chart

Gold price stalled its upside break from the falling wedge at $1,964, as sellers jumped back last Friday.

Gold price, however, closed the week above the critical 100-Daily Moving Average (DMA), then at $1,954.  

Meanwhile, the 14-day Relative Strength Index (RSI) is edging lower, looking to test the midline, suggesting that the corrective downside in Gold price could likely extend.

Adding credence to the bearish potential in Gold price, the 50 DMA has crossed the 100 DMA from above, but Gold sellers await a confirmation on a daily closing basis to flex their muscles.

Immediate support now awaits at the $1,950 psychological barrier, below which the $1,940 demand area could cap the Gold price decline. Further south, Tuesday’s low of $1,932 will be challenged.

On the upside, a sustained break above the June 16 high at $1,968 is critical to reviving the uptrend toward the June 2 high at $1,984. The next relevant upside barrier for Gold price is the  $2,000 mark.