Gold Price Forecast: XAU/USD slides further below $1,800 mark amid a modest USD strength

Update: Gold extended the previous day's modest pullback from near three-week tops and edged lower for the second consecutive session on Wednesday. The retracement slide dragged the commodity back below the $1,800 mark and was sponsored by a modest US dollar strength. The overnight goodish pickup in the US Treasury bond yields helped the USD to stall its recent corrective fall from a nine-and-half-month top. Apart from this, expectations that the Fed could still begin rolling back its pandemic-era stimulus in 2021 extended some support to the greenback. This, in turn, was seen as a key factor that acted as a headwind for dollar-denominated commodities, including gold.

Apart from this, a generally positive tone around the equity markets further undermined the safe-haven XAU/USD. The global risk sentiment got a lift after China said that it had stopped the community spread of COVID-19, which restored confidence in the country's growth dynamics for the rest of the year. Adding to this, the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine and further boosted investors' appetite for riskier assets. The downtick could further be attributed to some technical selling following the overnight failure near the 100-day/200-day SMA confluence hurdle near the $1,810-11 region.

Market participants now look forward to the US economic docket, highlighting the release of Durable Goods Orders. The data might influence the USD price dynamics and provide some impetus to gold later during the early North American session. The key focus, however, remains on Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. Powell's remarks will be scrutinized for clues about the likely timing of the Fed's tapering plan, which will play a key role in driving the greenback in the near term. This, in turn, should assist investors to determine the next leg of a directional move for the non-yielding gold.

Previous update: Gold (XAU/USD) holds the lower ground near $1,795, down 0.45% intraday, during a two-day downtrend ahead of Wednesday’s European session.

Although risk-on mood favored gold earlier during the previous day, mixed US data and cautious sentiment ahead of the week’s key releases dragged the metal from a three-week top the previous day. That said, the US Dollar Index (DXY) strength exerts an additional downside pressure on the metal to mark a second consecutive daily loss.

Softer US Richmond Fed Manufacturing Index data for August, 9 versus 25 expected, joins the first rise in the New Home Sales in four months to push back the Fed’s tapering concerns as policymakers brace for Jackson Hole Symposium. The mixed data currently looks at the US Durable Goods Orders for July, forecast -0.3% versus +0.9% prior, for further firming up odds favoring the need for easy money policies.

Also positive for the risk appetite was the US House of Representatives passed a $3.5 trillion budget and is progressing on the $1.2 trillion infrastructure plan, which in turn boosts the stimulus hopes.

However, multi-day top of the US covid infections and a record high of daily virus cases in Australia, not to forget fading vaccine optimism, weigh on the market sentiment and heavy the gold prices. Furthermore, cautious mood ahead of the annual speech of Fed Chair Jerome Powell at the Jackson Hole Symposium, on August 27, adds to the sluggish mood and favors the commodity sellers.

Amid these plays, the US 10-year Treasury yields stay firmer around 1.30% after rising the most in two weeks the previous day, underpinning the USD strength. Also favoring the greenback buyers, weighing on the gold’s quote, is mildly offered US stock futures.

Given the recently release mixed data from the US, gold bears look to the US Durable Goods Orders for July, forecast -0.3% versus +0.9% prior, for further firming up controls. However, the US preliminary Q2 GDP and Fed Chair Jerome Powell’s speech the Jackson Hole becomes the key event of the week.

Read: Durable Goods Orders Preview: The trigger for a greenback comeback?

Technical analysis

Gold extends pullback from a three-week-old horizontal resistance to attack 200-SMA, around $1,795 by the press time.

Given the firmer Momentum and bearish MACD signals, the latest pullback is likely to extend towards an ascending support line from August 10, near $1,790.

However, any further weakness past $1,790 will confirm a rising wedge bearish formation, suggesting a theoretical slump towards $1,700.

Meanwhile, recovery moves need to cross the $1,807 immediate hurdle to recall gold buyers.

Following that, the upper line of the stated bullish chart pattern and six-week-old horizontal resistance, respectively around $1,824 and $1,835, will be in focus.

Gold: Four-hour chart

Trend: Further weakness expected