Gold Price Forecast: XAU/USD eyes further downside as United States data fuels US Dollar

• Gold Price remains on the back foot after four-day downtrend, bears cheer 100-DMA break.
• XAU/USD slides on comparatively better United States data, downbeat statistics from UK, Eurozone also add strength to US Dollar.
• Federal Reserve concerns appear dicey as July rate hike is almost given but policy pivot looms too.
• US Consumer Confidence will entertain intraday Gold traders, Wednesday’s Fed verdict is the key.

Gold Price (XAU/USD) holds lower ground near $1,955, extending reversal from a 10-week-old horizontal resistance after a four-day downtrend amid early trading hours of Tuesday’s Asian session. In doing so, the XAU/USD takes clues from the comparatively upbeat US data while ignoring upbeat sentiment and hopes of witnessing a sooner end to the tightening cycle at the major central banks.

Gold Price stays depressed as United States data favor US Dollar bulls

Gold Price stays on the back foot for the fifth consecutive day despite the latest inaction at the lowest level in a week. In doing so, the XAU/USD cheers comparatively better US PMI data versus the activity numbers from the UK, Eurozone and Australia.

That said, the preliminary readings of the US S&P Global Manufacturing PMI for July improved to 49.0 from 46.3 prior and 46.4 market forecasts while the Services PMI eased to 52.4 versus 54.0 expected and 54.4 previous readings. With this, the Composite PMI edged lower to 52.0 from 53.2 prior and 53.1 market forecasts. That said, Chicago Fed National Activity Index for June slid to -0.32 from -0.28 prior (revised) and 0.03 market forecasts.

During the last week, upbeat prints of the US Retail Sales Group for June superseded the downbeat US housing and activity data to underpin the US Dollar’s rebound from the lowest levels in 15 months. However, the previously released US employment and inflation clues have been downbeat and flag fears of the Federal Reserve’s (Fed) policy pivot past July, which in turn prod the greenback bulls of late.

On the other hand, the first readings of the Eurozone HCOB Manufacturing PMI slumped to the lowest level since May 2020, to 42.7 for July from 43.4 prior and versus 43.5 market forecasts. On the same line, German HCOB Manufacturing PMI also dropped to the 38-month low while Services and Composite PMIs declined below the market expectations and previous readings for July.

Furthermore, the preliminary readings of the UK S&P Global/CIPS Manufacturing PMI for July dropped to the lowest level of 2023 whereas Australia’s preliminary S&P Global Manufacturing PMI for July improved to 49.6 from 48.2 prior but the Services PMI drops below 50.0 level to 48.0 versus 50.3 prior, suggesting a contraction in the activities. Hence, the US PMIs are comparatively upbeat and hence underpin the US Dollar’s run-up for the fifth consecutive day despite posting unimpressive data. That said, the US Dollar Index (DXY) rose for the fifth consecutive day to refresh the highest levels in nearly a fortnight while the Euro dropped across the board, which in turn weighed on the Gold Price.

Mixed headlines about China also weigh on XAU/USD price

While the US data allows the US Dollar to edge higher and weigh on the Gold Price, hopes of witnessing a sooner end to the major central banks’ restrictive monetary policies put a floor under the XAU/USD. Not only the policy pivot chatters but headlines about China also defend the market optimists and prod the Gold bears. That said, the Chinese media conveyed details of the Communist Party's Politburo meeting on Monday that cited new difficulties and challenges for the economy while also showing the policymakers’ readiness for prudent monetary and fiscal policies. Before that, China state planner National Development and Reform Commission (NDRC) issued a notice to promote the high-quality development of private investment. That said, NDRC also pledged encouragement of participation in some projects of transport, water and clean energy, as well as in new infrastructure and modern agriculture.

US CB Consumer Confidence may entertain Gold buyers before Fed decision

While the PMIs join China data to keep the Gold sellers hopeful amid a sluggish start to the likely unimpressive day, mainly due to the light calendar, the XAU/USD bears may keep the reins amid a broadly firmer US Dollar. However, Germany’s IFO Survey details for July and the US CB Consumer Confidence for the said month will entertain the Gold traders for the day. Even so, major attention will be given to Wednesday’s Fed monetary policy meeting and Thursday’s ECB announcements for clear directions.

Also read: Federal Reserve Preview: Powell can play three distinct cards, each with a different US Dollar move

Gold Price Technical Analysis

A clear reversal from the 10-week-old horizontal resistance joins the Relative Strength Index (RSI) line’s retreat, placed at 14, to defend the Gold sellers. Adding strength to the downside bias about the XAU/USD is the metal’s latest break of the 100-DMA support, now immediate resistance of around $1,962.

With this, the Gold Price is likely to decline further toward the 50-DMA support of around $1,947. However, a horizontal area comprising multiple levels marked since mid-March, around $1,935-33, will challenge the bears afterward.

In a case where the XAU/USD bears keep the reins past $1,933, a convergence of an upward-sloping trend line from late February and the 61.8% Fibonacci retracement of February-May upside, also known as the golden Fibonacci ratio, of around $1,910 will act as the last defense of the Gold buyers.

On the contrary, a daily closing beyond the 100-DMA of around $1,962 will allow the Gold buyers to challenge the aforementioned horizontal resistance surrounding $1,985.

Following that, the $2,000 psychological magnet and April’s high surrounding $2,050 could lure the XAU/USD bulls.

Overall, the Gold bears are tightening their grips but the conviction remains pending unless the quote stays beyond $1,910.

Gold Price: Daily chart

Trend: Further downside expected