Gold Price Forecast: XAU/USD recovers from daily lows amid USD weakness

The Gold spot price XAU/USD saw volatility on Monday and found support at a daily low of $1,912 and settled at $1,925. In that sense, US bond yields declined as investors continued to assess the mixed Nonfarm Payroll figures from Friday, and focus now shifts to US Inflation data on Wednesday. Meanwhile, the US Dollar index DXY fell to its lowest level since May at 101.95.

USD continues to lose ground as markets assess NFP figures

The US Dollar loses interest in response to lower-than-anticipated job creation figures, leading investors to predict a more cautious approach from the Federal Reserve (Fed). Nevertheless, persistent wage inflation could compel the Fed to continue its aggressive stance and mitigate potential losses for the US dollar. Additionally, the upcoming release of the Consumer Price Index (CPI) data will offer further insights into inflation expectations within the country. Markets expect a decline in the headline figure to 3.1% year-on-year in June from the previous 4%, while the Core figure is projected to decrease to 5%, compared to its previous 5.3% level.

Meanwhile, the US bond yields, which could be seen as the opportunity cost of holding Gold, declined across the board. The 2-year bond yields 4.86%, while the 5 and 10-year rates stand at 4.23% and 4%, respectively. That being said, according to the CME FedWatch tool, investors have already priced in a 25 basis point (bps) hike for the next Fed meeting, and the odds of another increase for this year stand around 40%.

XAU/USD Levels to watch

According to the daily chart, the XAU/USD holds a neutral to bullish stance for the short term. Despite standing in negative territory, the Relative Strength Index (RSI) holds a positive slope near its midline and the Moving Average Convergence Divergence (MACD) prints rising green bars indicating a growing buying momentum. However, to confirm the bullish outlook, the bulls must consolidate above the 20-day Simple Moving Average at $1,927.

Resistance levels: $1,927 (20-day SMA), 1,950 (100-day SMA), $1,970.
Support levels: $1,905, $1,900, $1,865 (200-day SMA).