Gold Price Forecast: XAU/USD retains modest gains ahead of key US headlines

XAU/USD Current price: $2,419.07

• Markets turned risk-averse on dismal earnings reports and ahead of US first-tier data.
• The United States Gross Domestic Product is foreseen at 1.9% in Q2.
• XAU/USD maintains a positive tone but lacks near-term momentum.

XAU/USD trades in the $2,420 region, extending its recent recovery to $2,431.87 early in the American session. The US Dollar shed ground following the release of the United States (US)  Purchasing Managers Index (PMI). According to S&P Global preliminary estimates, the business activity in the private sector continued to expand at a healthy pace in July, with the Composite PMI improving to 55 from 54.8 in June. On a negative note, manufacturing output declined to 49.5 after posting 51.6 in the previous month, while the Services PMI rose to 56 from 55.3.

Demand for safe-haven assets, however, helped both Gold and the USD. Wall Street came under strong selling pressure after the first batch of earnings reports missed expectations, driving US indexes into fresh weekly lows. Multiple US companies will report results this week, driving stock markets and, hence, the USD.

Additionally, the US will unveil the first estimate of the Q2 Gross Domestic Product (GDP) on Thursday. The economy is expected to have grown at an annualized pace of 1.9% in the three months to June, better than the 1.4% achieved in the first quarter of the year. Alongside GDP data, the US will revise the quarterly Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) favourite inflation gauge. The country will also publish June Durable Goods Orders and the usual weekly unemployment figures.

XAU/USD short-term technical outlook  

From a technical point of view, the daily chart for XAU/USD shows the pair extended its recovery, above the 38.2% Fibonacci retracement of the $2,293.54/$2,483.68 rally at $2,411.25. The pair bottomed earlier in the week around the 50% retracement at $2,389.30, somehow confirming the latest slide was a mere correction in between the dominant bullish trend. Furthermore, technical indicators have pared their slides within positive levels and are slowly resuming their advances, in line with renewed buying interest. Finally, moving averages maintain their upward slopes, with the 20 Simple Moving Average (SMA) converging with the aforementioned 50% retracement, reinforcing the strength of the level.

In the near term, and according to the 4-hour chart, the risk skews to the upside, although the Momentum is limited. XAU/USD trades above all its moving averages, with the 20 SMA turning flat above bullish longer ones. Technical indicators, in the meantime, offer neutral-to-bullish slopes within positive levels, suggesting absent selling interest.

Support levels: 2,411.25 2,389.30 2,377.10   

Resistance levels: 2,425.70 2,439.90 2,451.40