Gold Price Forecast: XAU/USD hits three-week highs at $1800 amid softer USD, ahead of ISM

Update: Gold price is off the three-week highs of $1800 but remains strongly bid in Tuesday’s Asian trading, underpinned by the ongoing correction in the US dollar across the board. Investors refrain from going against the recent uptrend in gold ahead of Wednesday’s FOMC meeting’s minutes, which will offer more clarity on the Fed’s monetary policy going forward. Meanwhile, technically, gold price looks set to extend its advance towards the bearish 21-Daily Moving Average (DMA) at $1809 after it closed Monday above the critical 100-DMA at $1790. However, it remains to be seen if gold bulls retain control ahead of the US ISM Services PMI due for release later on Tuesday.

Read: ISM Services PMI Preview: Why the inflation component could trigger a dollar rebound

Gold (XAU/USD) recovery fades during the fifth day of trading after refreshing the multi-day low on June 29. That said, gold bulls take a breather around key technical levels surrounding $1,791, following an upside break of a short-term hurdle the previous day, amid an early Asian session on Tuesday.

Bulls await more clues…

With the US markets’ extended weekend restricting clues to stretch Friday’s optimism, post US jobs report, gold traders await initial full market reactions to the latest catalysts to keep the gold buyers hopeful.

Among them, the coronavirus headlines gain major attention as fears of another strain called Epsilon, which is resistant to the vaccine, battles the UK and German moves to ease the virus-led restrictions. Also, Australia keeps struggling with the Delta covid variant even as the government allowed citizens to take AstraZeneca jabs if they wish.

Further, downbeat inflation expectations, according to the 10-year breakeven inflation rate of the St. Louis Federal Reserve (FRED) also weigh on the market sentiment. The reason could be traced from the recently mixed US figures. On Friday, US Nonfarm Payrolls (NFP) jumped to a 10-month high but an uptick in the Unemployment Rate seemed to have probed the odds backing the Fed’s monetary policy adjustments.

On a different page, OPEC+'s indecision over the crude output cut leads to sustained restrictions ahead of the next meeting, which in turn lends indirect support to the gold prices.

Amid these plays, S&P 500 Futures stay mildly bid around the record top while the US 10-year Treasury yields lick their wounds around 1.43% by the press time.

Moving on, US ISM Services PMI for June, expected 63.5 versus 64.0 prior, will be crucial as gold buyers seek further deterioration of the factors supporting the Fed’s rate hike moves ahead of Wednesday’s FOMC minutes.

Technical analysis

Gold (XAU/USD) prices battle 100-SMA after crossing a 12-day-old resistance line the previous day.

The yellow metal’s reluctance to pierce the key SMA could be traced to the peaking Momentum line. However, bulls may follow MACD signals to remain hopeful unless the quote drops back below the previous resistance line near $1,787.

Following that, $1,773 and the $1,773 levels may entertain short-term sellers ahead of directing them to June’s low around $1,750.

Meanwhile, an upside clearance of the $1,794 immediate SMA hurdle will need validation from the $1,800 threshold before directing the bulls toward the 200-SMA level near $1,844.

It’s worth noting that a horizontal line comprising multiple levels marked during June 10-15 around $1,870 could probe gold buyers past $1,844.

Overall, gold bulls flex muscles but need strong support for conviction.

Gold: Four-hour chart

Trend: Further recovery expected

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Gold Weekly Forecast: XAU/USD fails to clear key resistance at $1,790