Gold Price Forecast: Bears took the reins Monday to test below $1,800 despite crash in real US yields

End of US session update: The gold price was headed for a daily close below the significant $1,800 on Monday.  

With under two hours to go until the close of the daily candle, it is trading near the lows of the day at $1,796.44 after falling from a high of $1,811.60 in the European morning. 

Gold prices fell despite a better-offered greenback in Europe.

The dollar index DXY, which measures the currency against six major peers, slipped some 0.40% to 92.531 but was still close to last week's 3-1/2-month high of 93.194.

The US dollar was pressured due to a slide in US nominal yields which sank US real yields to a record low of -1.13% before recovering in the New York session.

''Gold's failure to rally, even with rising growth concerns and real rates hitting fresh all-time lows, continues to highlight the lack of investor interest and the heightened risk of another pullback,'' analysts at TD Securities said, warning of downside risks in the event of higher real and nominal rates. 

''Gold remains vulnerable to further increases in real rates as both inflation and nominal rates normalize.''

For the sessions ahead, investors will be trying to second guess the outcome of the Federal Open Market Committee meeting that kicks off on Tuesday and concludes with the Fed's chair Jerome Powell's press conference. 

In this regard, there has been a sudden quadrupling of daily US coronavirus delta variant infections to levels approaching those seen in last summer's virus surge.

The conflicting growth and inflation risk narratives will make the Fed’s job even trickier.

The delta variant spread could be a spanner in the works for the most hawkish of board members this meeting around, potentially leaning towards a Goldilocks scenario outcome for gold and the stock markets.

Therefore, considering the uncertainty and a meeting too hard to call, consolidation in gold prices could be the most likely scenario for the sessions ahead of the meeting. 

XAU/USD daily chart

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The XAU/USD pair closed the previous week in the negative territory and seems to be having a difficult time staging a recovery at the start of the week. After edging higher toward $1,810 during the European trading hours, gold reversed its direction in the second half of the day and was last seen posting small losses at $1,800.

In the absence of high-tier macroeconomic data releases and significant fundamental drivers, investors are likely to react to technical price developments. Currently, gold is trading near the 100-day SMA, which is currently located at $1,800. A daily close below that level is likely to attract additional sellers and trigger another leg down toward $1,790 (July 23 low) ahead of $1,775 (Fibonacci 61.8 retracement of April-June uptrend).

On the flip side, the 200-day SMA seems to have formed strong resistance at $1,820. In case the price rises above that level, the near-term technical outlook could turn bullish with the next target aligning at the $1,830/$1,833 area (Fibonacci 38.2% retracement, 50-day SMA).

Meanwhile, the Relative Strength Index (RSI) indicator on the daily chart stays below 50, confirming the view that buyers are struggling to retain control of the price.

Key macroeconomic events to keep an eye on

On Tuesday, June Durable Goods from the US will be the first high-impact data of the week. Previewing this release, "estimates for Durable Goods Orders are likely too high, as past misses on this release and disappointments in other figures for June allude to," said FXStreet analyst Yohay Elam. "The market reaction will likely be muted ahead of the Fed – apart from a minor mean-reversion – but the data would be useful for trading GDP on Thursday."

On Wednesday, the US Federal Reserve will announce its Interest Rate Decision and publish the Monetary Policy Statement. Market participants will look for clues regarding the timing of asset tapering. If FOMC policymakers hint at a reduction in asset purchases before the end of the year, this could be seen as a hawkish tilt in the policy outlook and provide a boost to the greenback. On the other hand, the Fed could voice concerns over the coronavirus Delta variant crippling the economic recovery and adopt a cautious tone, which could be seen as a USD-negative development.

On Thursday, the US Bureau of Economic Analysis will release its first estimate of the second-quarter annualized GDP growth before publishing the Personal Consumption Expenditures (PCE) Price Index data on Friday.

Additional levels to watch for