Gold Price Forecast: XAUUSD in search of a clear direction, awaits NFP

Gold Price enjoyed good two-way businesses, having tumbled to ten-day lows of $1,829 in the first half of Wednesday’s trading. The ongoing advance in the US dollar and the yields, amid persistent risk-off flows, weighed down on the bright metal. Later in the day, XAUUSD rebounded swiftly after seeing dip-buying interest, as inflation worries engulfed markets on surging oil prices, reviving the appeal of gold as a hedge against inflation. An upside surprise in the US ISM Manufacturing PMI, arriving at 56.1 in May vs. 54.5 expected, rekindled the US economic optimism and brought the aggressive Fed tightening expectations back on the table, which added to the risk-off mode and fuelled a sell-off in Wall Street indices. The US stocks retreat offered a floor to the price of gold.

Heading into the US AFP Employment Change data release this Thursday, gold price is lacking the follow-through recovery momentum. A bull-bear tug-of-war is well in play, as the dollar holds onto its recent advance while Treasury yields stage a minor pullback. The benchmark US 10-year yields are retreating after facing rejection just shy of the 3% level, which could bode well for the non-yielding metal. Bulls, however, remain cautious amid resurfacing aggressive Fed rate hikes bets and ahead of the US ADP jobs data, which seen rising to 300K in May vs. 247K previous.

Meanwhile, investors will also assess the latest hawkish Fed commentary and the upbeat outlook on the economy, as shown by the central bank’s Beige Book released late Wednesday. Strong US employment numbers will add to the hawkish Fed rate hike track, which could likely bolster the dollar’s demand at gold’s expense.

Gold Price Chart: Daily chart

Gold Price rebounded firmly and recaptured the 200-Daily Moving Average (DMA) at $1,841 on a daily closing basis.

The yellow metal has opened Thursday above the bearish 21-DMA at $1,845, which is now acting as strong support.

Bulls could take out the $1,850 hurdle should the recovery momentum extend in the sessions ahead.

The next key resistance level is seen at $1,859, which is the descending trendline hurdle. A firm break above the latter will call for a retest of the previous week’s high of $1,870.

The 14-day Relative Strength Index (RSI) is sitting just beneath the midline, suggesting that recovery attempts are likely to remain shallow and sellers could jump in on the bounce.    

A breach of the 21-DMA once again will expose the 200-DMA support, below which the previous day’s low of $1,829 will be put to test.

The next downside target aligns at the $1,820 round figure before the May 19 low of $1,811 could be threatened.