Gold Price continues to move with a temporary bullish bias, big events coming up

• Gold Price is bid as bulls move in for the kill following extreme supply.
• A 50% mean reversion on the weekly chart is eyed.
• Federal Reserve sentiment, ECB and US data are all eyed as potential catalysts. 

Gold price leans bullish with time frame continuity in the favour of the bulls as XAUUSD inches higher within a bullish correction of the recent leg of supply from $1,750 that took out the $1,700 level last week. However, in general, a pullback in the US dollar continues to support the gold price as investors move to the sidelines ahead of key central bank meetings.

US dollar pauses for breath below a 20-year peak 

The US dollar rested on Tuesday below the 20-year highs, as per the DXY index, as it corrects towards a potential area of support in the longer-term time frames, an area that XAUUSD traders will be watching. The index, which measures the greenback vs. a basket of currencies has moved in on the 50% mean reversion level of the last weekly bullish impulse.

Read more: US Dollar Index outlook: Dollar remains at the back foot on calmer tones from Fed

From a daily perspective, the price is hovering over a void of offers that leaves 105.27 vulnerable should DXY bears continue to hit the bids. Gold traders will be keeping a close eye on price action at this juncture. As for catalysts that could tip the balance, the biggest risk to the US dollar and the gold price this week might well be the European Central Bank, ECB, on Thursday, although US PMI Surveys for July will be keenly watched ahead of the Federal Reserve meeting next week. 

ECB and US PMI Surveys are key

ECB President, Christine Lagarde

The ECB and US PMI Surveys have the potential to kick start moves in the gold price. The ECB has firmly telegraphed a 25bps rate hike and while it is unlikely to surprise, the meeting will coincide with news related to the Nord Stream pipe. After a shutdown, gas is supposed to resume flowing. However, Berlin is growing concerned that Moscow may not resume the flow of gas as scheduled. Russia's Gazprom declared force majeure on gas supplies to Europe to at least one major customer, in a letter dated July 14 and seen by Reuters at the start of this week. 

Heated inflation risks had already seen money markets punting for a half-point hike. The uncertainty is indeed a cloud over the ECB event. However, if the central bank goes ahead with a rate hike, be it 25 or 50bps, regardless, it will be the first time in more than a decade and the outcome of the event could have a material impact on the euro, US dollar and gold price. 

As for US PMIs, analysts at TD Securities explained ''business surveys fell markedly in June, led by broad declines in the S&P Global PMIs. The mfg index, in particular, posted a large retreat to 52.7 from 57.0 in May.''

''While we look for relief in the pace of declines in the mfg PMI, we still expect it to register a new drop in the flash estimate. Conversely, we expect a steady number for the services index after recent declines.''

Fed day looms

The Federal Reserve is around the corner. It will take place on July 26-27 and for the time being, ''gold prices are being supported by the markets' repricing for odds of a 100bp hike after Fedspeak from notable hawks has pushed back against this narrative, which is raising the risk of a near-term short-squeeze,'' analysts at TD Securities argued. ''Notwithstanding, this scenario would create the ideal set-up for additional downside in the yellow metal.''

Gold price technical analysis

Gold price, from a weekly perspective, the bull correction is underway. However, the monthly lows of $1,676.86, as illustrated on the chart below, could come within reach sooner than later:

The grey areas on the chart above are void of bids which could draw in the gold price to test the commitments of bears in a 50% mean reversion. On the way there, however, we have a couple of major pivot points that could offer resistance at $1,721 and $1,753.