Gold Price Forecast: XAU/USD remains skeptical below $1,800 on steady USD

• Gold buyers take a breather on the way to consolidate weekly losses.
• Growth optimism, sluggish yields back the bulls despite mixed data.
• IMF, Fedspeak add to the DXY run-up to fresh three-month high.
• Chart of the Week: Gold meets critical landmark

Update: Gold prices pared some of their earlier day’s loss as US Treasury yields retraced from 1.47%. As of writing, XAU/USD trades at $1,778 with 0.11% gains. The greenback breached 92.50 on Thursday after the US  Initial Jobless Claims fell to a low pandemic low of 364K. The strong labor market condition fuels the fear of persistent inflation and a sooner than expected rollout of the ultra-accommodative Fed’s policy. The readings came a day before the much anticipated US Non Farm Payroll (NFP) data. Gold prices moved in a narrow trading range as investors remained cautious and stayed from making large positions ahead of the key US data. Any major shift in the readings could prompt the Federal Reserve to change its ultra-accommodative monetary policy. The US dollar trades at three-month, which makes gold expensive for the holder of other currencies.

 

Gold (XAU/USD) struggles to extend the two-day bounce off the key support below $1,780, edges higher around $1,776 amid the initial Asian session on Friday. The yellow metal’s recovery moves fade amid the pre-US Nonfarm Payrolls (NFP) anxiety, even as the economic recovery hopes back the gold buyers.

US ISM Manufacturing PMI came in a touch softer than 61.00 expected and 61.2 previous readouts to 60.6 in June. This also joins the details relating to the employment component that dropped to 49.9 while the prices-paid sub-component jumped to the highest since 1979. On the contrary, Initial claims for last week fell to 364K, dragging down the four-week average to 392.75K, which in turn backs a strong NFP print that is expected to rise from 559K to 690K in June.

Read: NFP Preview: Four reasons why June's jobs report could be a dollar downer

Other than the mixed data, the coronavirus woes in Asia-Pacific also probe the gold bulls. The covid updates from Australia seem to be positive of late as the new cases ease to 33 versus 49 prior. Also positive is the nation’s jabbing that recently picked up the pace to 8.0% fully vaccinated versus the 4% before a few days. This helps Queensland to lift local lockdowns from some parts of the state. Elsewhere, Indonesia announced an emergency from July 02 to 20 while infections in Malaysia and Thailand also become a concern for the markets.

Even so, policymakers at the US Federal Reserve and the International Monetary Fund (IMF) remain optimistic. Recently, Philadelphia Federal Reserve Bank President Patrick Harker told the Wall Street Journal that he supports the start of bond-buying pullback later this year. Following that, the IMF upwardly revised its US GDP growth forecast from 4.6% in April to 7.0%. The global institute also teased the Fed rate hike by late 2022, per Bloomberg.

Amid these plays, Wall Street benchmarks posted gains with S&P 500 refreshing record top for the sixth day whereas the US Treasury yields remain mildly bid. Further, The US dollar index (DXY) rose to the fresh high since early April the previous day but awaits more clues to move further to the north by the press time.

Given the escalating odds of the Fed’s action, amid stronger inflation, firmer NFP will pave the way for the monetary policy adjustments and put a safe-haven bid under the US dollar stronger, which in turn could weigh on the gold prices. On the contrary, bulls are already flexing muscles and may break the immediate bearish trend channel in case NFP drags the greenback down.

Technical analysis

Gold remains inside a two-week-old descending trend channel despite keeping the bounce off the key horizontal support from March.

Given the metal’s sustained upside beyond near-term key support, coupled with easing the bearish bias of the MACD, the gold prices may extend the latest recovery moves. However, multiple hurdles to the north require a strong fundamental push to back the bulls.

That said, the stated channel’s resistance line acts as the immediate upside hurdle, near $1,783, ahead of the 100-DMA level of $1,790.

In a case where gold buyers manage to cross the $1,790 resistance, the $1,800 threshold and mid-May lows near $1,809 can probe the upside ahead of the convergence of 50 and 200-DMA near $1,830-35 that becomes a trend-changer of broken.

Alternatively, the stated horizontal line surrounding $1,755 and the channel support near $1,746 will precede the April 13 low of $1,723 to check the gold sellers to their return. Though, the $1,700 round figure and the double bottom surrounding $1,675 marked earlier in the year will be crucial to watch afterward.

Gold: Daily Chart

Trend: Pullback expected