Gold Price Forecast: XAU/USD struggle with $2,400 extends amid market caution

• Gold price clings to $2,400, snapping a four-day downtrend early Tuesday.
• The US Dollar turns south with US Treasury bond yields, despite risk-off returning.    
• China’s economic worries could act as a headwind for Gold price.
• The daily technical setup continues to favor Gold buyers but $2,425 holds the key.

Gold price is making another attempt to reclaim $2,400 on a sustained basis, replicating the moves seen during Monday’s Asian trading. Gold price appears to be benefiting from a typical market caution and renewed China’s economic worries and ahead of key US earnings reports.

Gold price awaits fresh catalysts for a clear direction

Despite the return of risk-off flows, the US Dollar (USD) turns defensive, tracking the retreat in the US Treasury bond yields from two-week highs. Reports that US Vice President Kamala Harris secured 1976 delegates to become the Democratic Party’s presumptive nominee for November’s presidential election exert downward pressure on the Greenback.

It’s worth noting that Donald Trump’s chances of winning the election have narrowed after Joe Biden stepped down to allow Harris to run for the White House.  A Democratic win in the US presidency would imply higher taxes and the need for lower borrowing costs, suggesting that the US Federal Reserve (Fed) would have to keep the policy accommodative. This, in turn, would be bearish for the US Dollar in the long term.

Traders turn risk-averse, as worries over China’s economic slowdown mount while nervousness sets in before earnings at Tesla and Alphabet are due after Tuesday’s New York close. Investors scurry for safety in the traditional safe-haven Gold during such times. However, China is the world’s top yellow metal consumer and the slowing growth raises concerns over its physical demand for Gold.

According to Goldman Sachs, “Chinese gold demand is now cyclically soft due to recent price surges, but central banks in emerging markets including China are likely to continue to buy gold frequently, whether disclosed or not,” per Reuters.

Traders also eagerly await the US Gross Domestic Product (GDP) report for the second quarter on Thursday and Personal Consumption Expenditures (PCE) inflation data for June on Friday before placing any directional bets on the Gold price.

In the meantime, the mid-tier US housing data, the political developments and the corporate earnings will drive risk trends, eventually impacting the USD-denominated Gold price.

From a broader perspective, Gold price remains supported by the Fed interest-rate cut expectations, with a September easing almost a done deal. Markets are currently pricing in a September rate cut, as futures show a 97% chance, according to the CME Group’s FedWatch Tool.

Gold price technical analysis: Daily chart

Gold price stays supported so long as the 14-day Relative Strength Index (RSI) holds above the 50 level. The indicator is currently at 53.50.

The 21-day  and 50-day Simple Moving Averages (SMA) Bull Cross also remains in play, justifying the constructive outlook for Gold price.

if the Gold price rebound gathers strength, the $2,425 static resistance will be tested. The next topside barrier is seen at the previous lifetime high at $2,450, above which buyers will target the new all-time high of $2,484 reached last week.

On the other side, should sellers return, Gold price could test the 21-day SMA at $2,379 before falling further to the 50-day SMA support at $2,361.

The last line of defense for Gold optimists is seen at the $2,350 psychological level.