Gold Price Forecast: XAU/USD retargets $1,700 on renewed USD strength


  • Gold stays relatively quiet following Monday's sharp decline.
  • XAU/USD could stage a technical correction before the next leg down.
  • A daily close above $1,760 could put gold in a consolidation phase.

Update: After moving sideways near $1,730 during the first half of the day on Tuesday, the XAU/USD pair came under bearish pressure and was last seen losing 0.6% on the day at $1,719. In the absence of high-tier macroeconomic data releases, a more-than-1% increase seen in the 10-year US Treasury bond yield seems to be helping the USD continue to outperform its rivals. Currently, the US Dollar Index is at its highest level in nearly three weeks above 93.10. Earlier in the session, the US Bureau of Labor Statistics reported that Unit Labor Costs in the US rose by 1% in the second quarter after declining by 2.8% in the first quarter. 

Following Friday's selloff, gold suffered heavy losses at the start of the week and lost more than 4% in a two-day slide. Although XAU/USD managed to erase a portion of its daily losses in the second half of the day on Monday, it is having a difficult time extending its recovery. As of writing, the pair was virtually unchanged on the day at $1,730.

The unabated USD strength on the back of hawkish Fed commentary and upbeat data releases continue to force gold to stay on the back foot.

On Monday, Richmond Fed President Thomas Barking noted that the Fed has made substantial further progress toward the taper benchmark. Similarly, Atlanta Fed President Raphael Bostic added that he could see the Fed reducing purchases between October and December. Meanwhile, the monthly report published by the US Bureau of Labor Statistics revealed that the number of job openings on the last business day of June reached a new series-high of 10.1 million.

Reflecting the greenback's strong performance against its rivals, the US Dollar Index is staying afloat at its highest level in nearly three weeks above 93.00.

Later in the session,  the Nonfarm Productivity and the Unit Labor Costs data for the second quarter will be featured in the US economic docket. Moreover, investors look for fresh clues regarding the timing of asset tapering when Cleveland Fed President Loretta Mester and Chicago Fed President Charles Evans speak at 1400 GMT and 1830 GMT, respectively.

More importantly, July Consumer Price Index (CPI) data from the US will be watched closely by market participants on Friday. Commenting on gold's recent action, "the gold market would stay sensitive to inflation-driven data and US taper talk, so watch out for tomorrow’s US July CPI data," said Benjamin Wong, Strategist at DBS Bank.

US July CPI Preview: Inflation data unlikely to change Fed tapering expectations.

Gold technical outlook

Key technical levels remain intact on Tuesday as gold fluctuates in a relatively narrow range. In the meantime, the Relative Strength Index (RSI) on the daily chart stays below 30, suggesting that XAU/USD could look to correct its oversold conditions before pushing lower. The former support level at $1,750 now aligns as the initial resistance ahead of $1,760 (static level). A daily close above the latter could help XAU/USD go into a consolidation phase in the near term. 

On the flip side, $1,730 (static level) is the first target on the downside in case XAU/USD comes under renewed bearish pressure. $1,700 (psychological level) aligns as the next key support ahead of $1,687 (Aug. 9 low).

Additional levels to watch for

XAU/USD

Overview
Today last price 1730.31
Today Daily Change 0.47
Today Daily Change % 0.03
Today daily open 1729.84
 
Trends
Daily SMA20 1804.63
Daily SMA50 1815.45
Daily SMA100 1804.26
Daily SMA200 1817.86
 
Levels
Previous Daily High 1765.38
Previous Daily Low 1687.78
Previous Weekly High 1831.81
Previous Weekly Low 1758.79
Previous Monthly High 1834.17
Previous Monthly Low 1765.74
Daily Fibonacci 38.2% 1717.42
Daily Fibonacci 61.8% 1735.74
Daily Pivot Point S1 1689.95
Daily Pivot Point S2 1650.07
Daily Pivot Point S3 1612.35
Daily Pivot Point R1 1767.55
Daily Pivot Point R2 1805.27
Daily Pivot Point R3 1845.15

 

 

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