Gold Price Forecast: XAU/USD pares gains above $1,800 on USD rebound

Gold’s (XAU/USD) recovery moves lack follow-through around $1,810, up 0.20% intraday, heading into Tuesday’s European session. The market’s sentiment remains mildly optimistic, backing the gold buyers. However, the recent uptick in the US dollar seems to test the precious metal’s upside momentum.

That said, the US dollar index (DXY) reverses the early Asian losses while picking up bids to 92.22, keeps the previous day’s recovery moves from a one-week low.

While the coronavirus (COVID-19) concerns and reflation fears become the key contributor to the DXY upside, weighing on the gold prices, cautious mood ahead of the US Consumer Price Index (CPI) for June probe the traders. That said, US CPI ex Food & Energy is expected to cross the 3.8% previous readouts with 4.0% figures, portraying reflation fears and raising concerns over the Fed’s tapering, as well as a rate hike.

Earlier in Asia, New York Federal Reserve President John Williams said, per Reuters, “The US economy has not achieved the 'substantial further progress' set by the US Federal Reserve to start reducing asset purchases.” His comments solidify the hopes of extended easy money and favored equities.

It’s worth noting that the US policymakers are discussing budget plans that include President Joe Biden’s $4.0 trillion aid packages and add filters to the market’s moves.

Amid these plays, stock futures remain directionless around record top whereas the US 10-year Treasury yield rises for the third consecutive day, up 1.1 basis points (bps) near 1.37% by the press time.

Other than the covid headlines and US CPI, gold traders also stay cautious with eyes on Fed Chair Powell’s testimony, up for publishing on Tuesday.

Hence, multiple filters do test the gold buyers even as bulls manage to defend the $1,800 threshold.

Technical analysis

Gold remains capped inside a weekly rectangle amid strong Momentum. However, the bulls seek a clear upside break of the $1,811-15 resistance area, comprising 200-EMA and 38.2% Fibonacci retracement of June’s downturn, to keep the reins.

It’s worth noting that $,1830 and 61.8% Fibonacci retracement level near $1,853 could challenge the gold buyers past $1,815 whereas the monthly peak surrounding $1,818 acts as an additional upside filter.

Meanwhile, the $1,800 threshold and 23.6% Fibonacci retracement around $1,789, also comprising the rectangle support, could test the short-term sellers.

In a case where gold sellers keep reins below $1,789, June 18 low near $1,760 and the previous month’s low near $1,750 will be in the spotlight.

Overall, gold prices remain positive but bulls await fresh clues to tighten the grips.

Gold: Four-hour chart

Trend: Bullish