Gold Price Forecast: XAU/USD drops back towards $1810 amid renewed USD buying

Update: Gold price is reversing its bounce in the European session, having ran into fresh offers at $1815 levels. A sudden spurt in the demand for the US dollar across the board amid firmer Treasury yields appears to be the key catalyst behind the latest leg down in gold price. Markets are turning cautious, as the European stocks trim early gains on downbeat German and Eurozone Final Services PMIs, underpinning the dollar’s safe-haven demand.

Gold price is now testing the $1810 round number on rejection at higher levels, with the bulls reluctant to jump in at the moment, as they await the US ADP jobs report and the ISM Services PMI to initiate fresh trading opportunities in the greenback. Meanwhile, gold price will seek a fresh direction on the outcome of the critical US NFP data due for release on Friday.

Read: Gold Price Forecast: XAU/USD awaits a range breakout but not so soon, NFP in focus

Gold (XAU/USD) snaps a three-day downtrend, up 0.14% intraday near $1,813, as European traders brace for Wednesday’s work. In doing so, the yellow metal benefits from the downbeat US dollar but the commodity buyers remain cautious ahead of the day’s key data, namely US ISM Services PMI and ADP Employment Change.

That said, the US Dollar Index (DXY) drops the most in the week, down 0.05% on a day near 92.00, by the press time.

Although the previous day’s strong Factory Orders and hawkish Fedspeak tried to recall the greenback bulls, the fresh covid fears at home and the Senate deadlock over stimulus tested the USD bulls on Tuesday. Also weighing on the US currency was the upbeat closing of Wall Street amid strong earnings and growth expectations.

Though, the US Centres for Disease Control and Prevention’s (CDC) temporary moratorium, expiring on October 03, after noting the heaviest jump in infections since February exert additional downside pressure on the USD afterward. Also challenging the greenback, favoring gold prices, was the market’s cautious mood before the early signal for Friday’s Nonfarm Payrolls.

It should be noted that the coronavirus numbers from Japan, India, China and Australia were also worrisome while the UK’s infection slowed down of late.

Amid these plays, US stock futures and Asia-Pacific shares remain mildly offered whereas the US 10-year Treasury yields remain steady around 1.18%.

Given the mixed sentiment and the US dollar weakness, gold prices may keep the recent recovery prior to the US data.

ISM Services PMI for July, expected 60.4 versus 60.1, coupled with the ADP Employment Change for the said month, market consensus 695K versus 692K prior, will be the key data to watch. Additionally, covid headlines and stimulus news, not to forget geopolitical updates concerning Iran and China, can also entertain gold traders.

Technical analysis

Gold extends rebound from 50-SMA amid gradually improving RSI conditions and receding bearish bias of the MACD histogram, suggesting further advances targeting July 25 high near $1,825.

However, double-top formation near $1,832-34 becomes a tough nut to crack for the metal buyers, which if crossed won’t hesitate to challenge late May’s low near $1,872.

During the rise, early June’s bottom surrounding $1,856 may offer an intermediate halt.

Alternatively, a downside break of 50-SMA, near $1,809, will be challenged by an ascending support line from June 29, close to $1,801, as well as the $1,800 round figure.

Overall, gold buyers remain unconvinced below $1,834 but intermediate consolidation can’t be ruled out.

Gold: Four-hour chart

Trend: Further upside expected