Gold Price Forecast: XAU/USD dives to $1,750 region, lowest since mid-April

• Gold rebounds from intraday low, prints two-day downtrend.
• Firmer US dollar weighs on the commodities during quiet session.
• Covid, Sino-American headlines join mixed Fedspeak to back the bears.
• Chart of the Week: Gold meets critical landmark

Update: Gold witnessed some aggressive selling during the early North American session and dived to two-and-half-month lows, around the $1,750 region in the last hour. The sharp intraday decline was sponsored by a broad-based US dollar strength, which tends to dent demand for dollar-denominated commodities, including gold. Investors remain concerned that the Fed will tighten its monetary policy if price pressures continue to intensify. This, along with a strong pickup in the US Treasury bond yields, acted as a tailwind for the greenback and further drove flows away from the non-yielding yellow metal.

Apart from this, the downfall could also be attributed to some technical selling following a decisive break below a one-week-old trading range support. A subsequent fall below the previous monthly swing lows, around the $1,763-62 region, might have already set the stage for an extension of the ongoing depreciating move. Hence, some follow-through weakness towards the $1,734-32 intermediate support, en-route the $1,720 level, now looks a distinct possibility. Market participants now look forward to the release of the Conference Board's US Consumer Confidence Index for some a fresh trading impetus.

Previous update: Gold added to the previous day's modest losses and witnessed some follow-through selling for the second consecutive session on Tuesday. The steady decline extended through the first half of the European session and dragged the XAU/USD to over one-week lows, around the $1,768 region in the last hour.

Despite mixed signals on the US inflation, investors have been betting on the prospects for an early move by the Fed to tighten its monetary policy. Apart from this, concerns about the spread of the more contagious Delta strain of the coronavirus acted as a tailwind for the US dollar and weighed on dollar-denominated commodities, including gold.

The greenback was further supported by a goodish pickup in the US Treasury bond yields, which was seen as another factor driving flows away from the non-yielding yellow metal. Meanwhile, the prevalent cautious mood around the equity markets did little to lend any support to the safe-haven gold or stall the intraday decline.

With the latest led down, gold confirmed a bearish break below a one-week-old trading range and now seems vulnerable to slide further. That said, investors might refrain from placing any aggressive bets, rather prefer to move on the sidelines ahead of Friday's release of the closely watched US monthly jobs report (NFP).

Hence, any subsequent fall is more likely to find decent support near monthly swing lows, around the $1,760 area. A convincing break below will set the stage for the resumption of the recent depreciating move witnessed since the beginning of this month.

Previous update: Gold (XAU/USD) regains $1,778 during the bounce off an intraday low as European traders prepare for Tuesday’s bell. Even so, the US dollar strength and challenges to the risk appetite keep gold sellers hopeful amid downbeat technical formation.

US dollar index (DXY) drops back to 91.90 while trimming the two-day gains. Although the pre-EU open consolidation seems to weigh on the dollar gauge, firmer US Treasury yields favor greenback bulls.

Mixed comments from the US Federal Reserve (Fed) policymakers and downbeat Dallas Fed Manufacturing Index figures dragged the US bond yields the previous day. However, fresh optimism over US President Joe Biden’s stimulus package and comparatively upbeat coronavirus (COVID-19) conditions in the US, versus that of Asia-Pacific and the UK, backs the Treasury yields after the heaviest drop in a week.

Wellington is up for lowering the covid alert after witnessing a sustained absence of the new virus cases but pandemic conditions seem to worsen in Australia. On the same line, the UK registered the highest infections since January 30 on Monday.

Fedspeak has recently been modest, as well as defensive, but Friday’s Core PCE Inflation renewed fears that the US central bank needs normalization of easy money policies. Considering that, Thomas Barkin, President of the Richmond Federal Reserve Bank, said on Monday, "The Fed has had substantial further progress against the inflation goal".

Elsewhere, US Secretary of State Antony Blinken’s comments over China also weighed on the market sentiment and put a safe-haven bid under the US dollar, indirectly challenging the gold prices. Blinken’s latest comments were, “China is ‘complicated’ when it comes to relations. Not asking anyone to choose between China and us.”

Against this backdrop, S&P 500 Futures remain pressured and so do Asia-Pacific shares. However, traders await fresh clues from US CB Consumer Confidence Index for June and additional comments from the Fed policymakers, not to forget Wednesday’s China official PMI, for fresh impulse.

Although the firming of the US data can exert downside pressure on gold, bears may remain cautious ahead of Friday’s US Nonfarm Payrolls (NFP).

Technical analysis

Gold fades the breakout of the two-week-old falling trend line, portrayed the previous day, amid downbeat MACD signals. Also challenging the gold sellers is the 50-SMA and a descending resistance line from June 18.

That said, the latest bounce could be ignored until staying below the $1,782 resistance line while odds of its battle to a 50-SMA level of $1,780 can’t be ruled out.

It should, however, be noted that a clear break of $1,782 will aim for the $1,800 threshold whereas any further upside will be tamed by the prior support line from June 04, surrounding $1,827.

On the contrary, the immediate resistance-turned-support line near $1,769 holds the key to gold’s fresh downside targeting the monthly low near $1,761.

During the quote’s further weakness past $1,761, March’s top close to $1,755 may test the gold bears before directing them to the mid-April lows near $1,723.

Gold: Four-hour chart

Trend: Bearish

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