Gold Price Forecast: XAU/USD rebounds from $1,755 as Fed, US-China inspired risk-aversion ebbs

• Gold price picks up bids to reverse the previous day’s pullback from monthly high.
• Upbeat China data, absence of major moves on Taiwan issue seemed to have favored gold buyers.
• US dollar’s failures to stay firmer also appear to have triggered XAU/USD recovery.
• Headlines surrounding Taiwan, Fedspeak and US data will provide fresh impulse.

Gold price (XAU/USD) renews its intraday high at around $1,765 while consolidating the biggest daily fall in a fortnight during Wednesday’s Asian session. In doing so, the yellow metal cheers the US dollar’s pullback from the weekly top amid a sluggish Asian session. The recovery moves also respect the firmer activity data from China.

The US Dollar Index (DXY) retreats from the weekly top near 106.55 to 106.34 by the press time as the market’s risk-aversion ebbs after firmer China Caixin Services PMI for July. That said, the private services gauge from the dragon nation rose to 55.5 versus 48 expected and 54.5 prior.

While portraying the mood, S&P 500 Futures rise 0.10% intraday while the US 10-year Treasury yields drop 1.5 basis points (bps) to 2.72% at the latest.

Earlier in the day, the US-China tussles over Taiwan gains major attention and extended the previous day’s risk-off mood, which in turn weighed on the gold prices. Recently, Taiwan's Defence Ministry said that China's drills around Taiwan demonstrate the country's determination to destroy regional peace and stability. It should be noted that China’s warning to the US to not play with the Taiwan card and promises to punish Taipei independence supporters, as well as blocking natural sand exports to the Asian economy, seemed to magnify the risk-off mood and drowned the US dollar. The fears grew stronger on concerns that tussles among the world’s top-two economies will have more negative consequences for the world amid recession fears.

Elsewhere, St. Louis Federal Reserve President James Bullard rejected US recession fears while favoring the 50 basis points (bps) rate hike. Further, San Francisco Fed President Mary Daly said that she is looking for incoming data to decide if they can downshift the rate hikes or continues at the current pace, as reported by Reuters. However, Chicago Fed President Charles Evans showed support for a 50 basis points (bps) rate hike for the September policy meeting if inflation does not improve, as reported by Reuters. Furthermore, Cleveland Fed President Loretta Mester, on the other hand, said she does not think the country is suffering a recession, adding that the labor market is in great shape. On inflation, however, she noted that it has not decreased "at all."

Moving on, the US Factory Orders for June and ISM Services PMI for July will join headlines surrounding China and the Fed to direct short-term XAU/USD moves.

Technical analysis

Gold price takes a U-turn from the 23.6% Fibonacci retracement of the April-July downturn amid bullish MACD signals and firmer RSI (14). However, the upside momentum needs validation from a 3.5-month-old resistance line, around $1,770 by the press time, to please the buyers.

Even so, an 11-week-old horizontal resistance zone and the 50-DMA, respectively near $1,785 and $1,791, could challenge the XAU/USD upside.

On the contrary, downside break of the immediate Fibo. support near $1,755 could direct the gold prices towards a fortnight-old support line, close to $1,747 at the latest.

Following that, the 21-DMA level around $1,732 could offer an intermediate halt during the anticipated fall targeting the yearly low near $1,680.

Gold: Daily chart

Trend: Sideways