Gold Price Forecast: XAU/USD appears a ‘sell the bounce’ trade near $1,670

• Gold price sees fresh demand, as the US dollar drops at the start of a new week.
• USD decline looks temporary amid hawkish Fed outlook, UK political uncertainty.
• XAU/USD sees a dead cat bounce after last week’s, and ahead of a data-light week.

Gold price is making a minor recovery attempt from near the $1,640 region, as the US dollar gives up a part of Friday’s turnaround at the start of the week. The dollar retreat could be associated with the lackluster performance in the US Treasury yields across the curve while the upswing in the GBP/USD also added to weakness in the buck. Bank of England (BOE) Governor Andrew Bailey’s recent comments and chatter over the UK political upheaval have propelled cable 0.50% higher on the day to 1.1250.

However, the rebound in the bright metal could be temporary, as the greenback could pick up safe-haven bids should markets turn more risk-averse. Investors remain on edge, despite the gains in the S&P 500 futures, as looming global recession risks, China doubling down on its zero-Covid policy and aggressive US interest rate hike outlook continue to sap their confidence.

Also read: Gold Price: Halloween comes early, XAU/USD back below critical bearish structure $,1670

On the economic data front, there is not much relevance on the US docket this Monday, therefore, Fedspeak will continue to impact the dynamics of the dollar and the yields, eventually influencing the yieldless gold. The developments surrounding UK politics will also significantly affect risk sentiment while attention shifts towards China’s Q3 GDP release later this week.

“The Chinese economy is forecast to expand at an annualized rate of 3.4% in the third quarter following the dismal 0.2% growth recorded in the second quarter. In case the GDP data falls below the market expectation, gold could have a hard time finding demand and vice versa,” FXStreet’s Senior Analyst, Eren Sengezer explains.

Gold price technical outlook: Daily chart

Following last week’s break below the rising trendline support, then at $1,670, sellers have remained in complete control. That level now coincides with the mildly bearish 21-Daily Moving Average (DMA).

Unless bulls find a strong foothold above the latter, any recovery attempts in the bright metal from two-week lows of $1,640 appear to be a dead cat bounce.

The immediate upside barrier is seen at the $1,650 level above which the previous intermittent lows around $1,660 could enact strong resistance.

The 14-day Relative Strength Index (RSI) is trading flatlined below the 50.00 level, keeping the bearish potential intact.

Therefore, daily candlestick closing below the $1,640 demand area is needed for a fresh downswing towards the $1,600 mark.

Ahead of that, the September low of $1,615 will challenge the bearish commitments.