Gold Price Forecast: XAU/USD looks to $1,968 and US Retail Sales for fresh Fed cues

Gold price is back on the bids above $1,950, snapping a two-day pullback from monthly highs. The United States Dollar (USD is losing its recent recovery momentum, following the US Treasury bond yields, as all eyes now remain on the US Retail Sales data for a clear directional impetus.

US Retail Sales data holds the key

The US Dollar came up for air on Monday after two straight weekly declines, as investors resorted to position adjustments ahead of Tuesday’s high-impact economic data from the United States this week, the Retail Sales. The US Retail Sales are seen rising 0.5% MoM in June while the Core figure is also expected to increase 0.3% MoM in the reported period. Retail Sales Control Group is likely to drop 0.3%, compared with a 0.2% growth recorded previously.

Upbeat US Retail Sales data could help revive hawkish bets surrounding the US Federal Reserve (Fed) policy path beyond the July 25 bps rate hike. Disappointing US data will rekindle recession fears and reinforce expectations that the Fed is nearing the end of its tightening cycle. The US Dollar is likely to remain in a win-win situation in both cases. Therefore, the upside attempts in the Gold price are likely to remain short-lived.

The Greenback found some comfort from resurfacing China’s growth concerns after the country’s Gross Domestic Product (GDP) expanded 6.3% in the second quarter, accelerating from 4.5% in the first three months of the year, but the rate was below the forecast for growth of 7.3%. Markets are awaiting more policy support from China, leaving investors on the edge.

A sense of caution also prevails following the meeting between the US Climate Envoy John Kerry and China’s top diplomat Wang Yi. Kerry told Wang that US President Joe Biden is very committed to stability in the US-China relationship.

Gold price technical analysis: Daily chart

Gold price extended its correction toward $1,940, as the bright metal confirmed a Bear Cross after the 50-Daily Moving Average (DMA) cut the 100 DMA from above on a daily closing basis.

With the 14-day Relative Strength Index (RSI), however, holding the fort above the midline, Gold buyers jumped back and managed to settle Monday above the 100 DMA, then at $1,955.

Therefore, risks appear skewed to the upside in the day ahead, although the US Retail Sales report holds the key.  

On the upside, Gold price needs to scale the monthly high of $1,964 at first. Buyers will then aim for the June 16 high at $1,968, above which the uptrend toward the June 2 high at $1,984 could resume.

Conversely, immediate support now awaits at the 50 DMA of $1,952, below which the previous day’s low could be tested en-route to the $1,940 round level. Further south, the July 12 low of $1,932 will be challenged.