Gold Price Forecast: XAU/USD rebound fades below $1,985 resistance as United States PMI loom

• Gold Price retreats below 2.5-month-old horizontal resistance after bulls cheered risk-on mood on Monday.
• China stimulus, receding bias about Federal Reserve’s rate hike propel XAU/USD.
• Softer prints of Fed’s preferred inflation, firmer China data and a retreat in yields add strength to Gold Price.
• United States S&P Global, ISM Manufacturing PMI for July eyed for clear directions of XAU/USD.

Gold Price (XAU/USD) pauses two-day recovery from the key moving average confluence as market players await the United States manufacturing activity data for July on early Tuesday in Asia. That said, the latest Federal Reserve (Fed) Bank Loan Survey showed grim outcomes and joined China news to allow the US Dollar to remain firmer, which in turn prod the Gold Price run-up beneath the key $1,985 hurdle, close to $1,965 by the press time. It’s worth noting that the risk-on mood allowed XAU/USD to remain firmer in the last two consecutive days.

Gold Price retreats on China, Federal Reserve news

Gold Price fades the two-day recovery moves amid recent grind headlines from China, as well as a downbeat Federal Reserve (Fed) Bank Loan Survey. That said, China's Commerce Ministry renews the Sino-US trade war fears by announcing measures to limit exports of some drones and drone-related equipment, starting from September 01, by citing the “national security and interests” late Monday suggests Reuters. It’s worth noting that China is a major global drone exporter and caters to various top-tier economies in that matter, including the US. As per the previous announcements from the US policymakers, China’s DJI provided more than 50% of the drones sold in the US, used mostly for public safety.

On the other hand, the Fed’s quarterly Senior Loan Officer Opinion Survey (SLOOS) US banks reported tighter credit standards and weaker loan demand during the second quarter (Q2 2023).

Additionally, the market’s cautious mood ahead of the US ISM Manufacturing PMI, as well as final prints of July’s S&P Global PMIs also challenges the previously firmer risk appetite and the Gold Price upside. While portraying the sentiment, S&P500 Futures remain sidelined after posting an upbeat start of the week while the United States Treasury bond yields pick up bids after declining in the last two consecutive days.

Risk-on mood underpins XAU/USD run-up

China stimulus joined receding fears of the higher rates at the major central banks, as well as the upbeat performance of the US giants during the latest earnings season, to propel the sentiment and allow the Gold Price to remain firmer. It’s worth noting, however, that the firmer US Dollar Index prods the XAU/USD buyers.

China State Council unveiled a slew of stimulus measures to conserve and boost consumption, which in turn fuelled the market’s risk-on mood during early Monday. Adding to that was the improvement in China's official PMI. That said, China’s official NBS Manufacturing PMI edges higher to 49.3 versus 49.2 expected and 49.0 prior but the Non-Manufacturing PMI eases to 51.5 from 53.2 prior.

On the other hand, Dallas Fed Manufacturing Business Index improves to -20.0 for July from -23.2 prior versus -26.3 expected whereas Chicago PMI rose to 42.8 from 41.5 prior versus 43.0 market forecasts. It should be noted that Friday’s softer prints of US inflation clues and the weekend comments from Minneapolis Fed President Neel Kashkari’s criticism of higher interest rates also exerted downside pressure on the greenback versus the Antipodeans even if the US Dollar Index managed to remain firmer on the day.

Against this backdrop, the US Dollar Index (DXY) managed to remain firmer on Monday, grinding higher towards 102.00 by the press time.

Moving on, the US Manufacturing Purchasing Managers Indexes (PMI) from the ISM and S&P Global for July will be crucial to determine intraday moves of the Gold Price amid the recently easing hawkish bias about the US Federal Reserve (Fed). It should be noted that the employment component of the scheduled PMIs will be closely observed since it’s the US Nonfarm Payrolls (NFP) week.

Also read: Gold Price Forecast: XAU/USD firming up as investors drop the US Dollar

Gold Price Technical Analysis

Gold Price (XAU/USD) extends Friday’s recovery from the convergence of the 21-DMA and the 50-DMA amid firmer prints of the Relative Strength Index (RSI) line, placed at 14, as well as the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator.

With this, the XAU/USD is likely to extend the latest rebound toward the horizontal resistance area comprising multiple levels marked since May 16, around $1,985, can’t be ruled out.

However, the receding strength of the bullish MACD signals raises doubts about the Gold Price run-up past $1,985.

Also challenging the XAU/USD bulls is the $2,000 round figure and the 61.8% Fibonacci retracement of the May-June downturn, close to $2,010, a break of which will give control to the Gold buyers.

On the contrary, the 21-DMA and 50-DMA, around $1,950-45 restrict short-term Gold Price downside.

Following that, a slew of peaks and troughs marked since late May, around $1,930, and the $1,900 round figure can act as the final defense of the Gold buyers.

Overall, the Gold price is likely to again confront the short-term key upside hurdle but is likely to print one more failure to cross the same.

Gold Price: Daily chart

Trend: Limited upside expected