Gold Price Forecast: XAU/USD remains confined in a familiar range ahead of key event/data risks

Gold price edges lower on the first day of a packed week and hangs near the lower end of a two-week-old trading range through the Asian session amid a modest US Dollar (USD) strength. The prospects of the Federal Reserve (Fed) raising interest rates by another 25 basis points (bps) at the end of a two-day meeting on Wednesday allows the Greenback to gain some positive traction for the third successive day. This, in turn, is seen as a key factor weighing on the US Dollar-denominated commodity. In addition, expectations that the European Central Bank (ECB) could surprise with an outsized 50 bps lift-off on Thursday further contribute to driving flows away from the non-yielding yellow metal. Concerns about economic headwinds stemming from rising borrowing costs support the safe-haven XAU/USD.

The Advance Gross Domestic Product (GDP) report released from the United States (USD) last week showed that the world's largest economy slowed more than expected in the first quarter. Meanwhile, the official Chinese Manufacturing Purchasing Managers' Index (PMI), released on Sunday, declined to 49.2 in April from 51.9 in March. Moreover, factory activity in Japan - the world's third-biggest economy - contracted for the sixth straight month in April. The incoming data fuel recession fears, which, along with speculations that the US central bank, beyond May, will hold rates steady for the rest of the year, might help limit the downside for the Gold price, at least for the time being. This might discourage traders from placing aggressive bearish bets ahead of the critical central bank event risks on Wednesday and Thursday.

The focus will then shift to the release of the closely-watched US monthly employment details on Friday. The popularly known Nonfarm Payrolls (NFP) report will play a key role in influencing the near-term USD price dynamics and determine the next leg of a directional move for the US Dollar-denominated Gold price. In the meantime, traders on Monday will take cues from the release of the US ISM Manufacturing PMI, due later during the early North American session amid relatively thin liquidity on the back of the Labor Day holiday in Europe.

Technical Outlook

From a technical perspective, any subsequent slide will likely find decent support near the $1,975-$1,974 horizontal zone ahead of the $1,970-$1,969 region. Some follow-through selling will mark a breakdown through a short-term trading range, making Gold price vulnerable to decline further. The XAU/USD might then accelerate the downfall towards the $1,948 resistance breakpoint, now turned support, en route to the 50-day Simple Moving Average (SMA), currently around the $1,937-$14,936 area. A convincing break below the latter will expose the $1,900 round-figure mark, which coincides with the 100-day SMA and should act as a strong base for the yellow metal.

Conversely, the $2,000 psychological mark has emerged as an immediate barrier. This is followed by the $2,010-$2,012 supply zone, which, if cleared decisively, will negate any near-term negative bias and prompt some technical buying. The Gold price might climb to the $2,039-$2,040 region before aiming to challenge the YTD peak, around the $2,048-$2,049 region touched on April 13. A sustained strength beyond the latter will be seen as a fresh trigger for bulls and set the stage for a move towards the 2022 swing high, around the $2,070 region and the $2,074-$2,075 zone, or the all-time high set in August 2020.