Gold Price Forecast: XAU/USD extends rebounds from two-month low, hits fresh highs above $1,960

• Gold rebounds sharply as government bond yields decline.
• XAU/USD climbs $30 from monthly lows to reach five-day highs.

Gold price is rising considerably on Tuesday, supported by a decline in government bond yields. XAU/USD hit a fresh daily high at $1,962 before pulling back towards $1,950.

Earlier in the day, XAU/USD hit a two-month low of $1,931 at the beginning of the European session before jumping more than $30 in a rally that started after Spain's inflation figures. 

According to preliminary data, Spain's Consumer Price Index (CPI) dropped 0.1% in May, against expectations of a 0.1% increase, with the annual rate falling from 4.1% to 3.2%. These figures could be anticipating a larger decline in Eurozone inflation, due to be released on Thursday. Germany will report April's preliminary CPI data on Wednesday.

Meanwhile, US economic data will also take centre stage, with the focus on employment figures. ADP will release its report on Thursday, and Nonfarm Payrolls are due on Friday.

Bond yields are falling in Europe and the US, with the 10-year German bund yield standing at 2.37%, the lowest since May 18, and the 10-year Treasury yield at 3.73%, down 1% for the day.

Levels to watch

Despite the recent rebound in XAU/USD, the overall trend remains downwards. If the price manages to consolidate above $1,955, it could provide some support for the bulls and potentially lead to a more sustainable recovery. The next resistance levels are seen at $1,965 and $1,970.

On the flip side, if the price declines below $1,945, it could expose the next support level at $1,935, and then potentially test the recent bottom near $1,930.

Technical levels