Gold Price Forecast: XAU/USD consolidates weekly gains above $1,800 ahead of US ISM PMI
- Gold begins NFP week on a back foot amid steady US dollar.
- Market sentiment dwindles amid stimulus hopes, covid woes, yields drop but stocks futures gain.
- US ISM PMI can offer immediate direction but US jobs report is the key.
- Gold Weekly Forecast: XAU/USD bulls hesitate as focus shift to NFP
Gold (XAU/USD) kick-starts August with mild losses of 0.22% intraday, around $1,810 heading into Monday’s European session. The yellow metal managed to post a positive weekly closing by the end of Friday amid broad US dollar weakness. However, cautious sentiment ahead of this week’s US Nonfarm Payrolls (NFP), not to forget today’s US ISM Manufacturing PMI, for July weigh on the commodity prices.
Other than the traders’ wait-and-watch mood, a complex market scenario filled with the downbeat Treasury yields in the US and China battling positive Asia-Pacific equities and stock futures also trouble the gold traders. On the top, sluggish US dollar and month-start position building seem to weigh on the gold prices.
It’s worth noting that the options market was the most bullish on gold, per one-month risk reversal data from Reuters, in 2021 during July. Hence, position consolidation may have triggered the commodity’s pullback of late.
Talking about the yields, US 10-year Treasury yields drop 1.4 basis points to 1.225% whereas Chinese bond yields drop to the lowest since June 2020. The bond coupons justify the market’s fears of Delta covid variant and Japan’s government pension fund’s, the world’s largest pension fund, cut in the US bond weigh in holdings.
On the contrary, Asia-Pacific stocks cheer hopes of stimulus as US lawmakers put forward President Joe Biden’s infrastructure spending package on the Senate’s floor with the hopes of getting it through the House during this week. China is also up for a multi-billion-dollars worth of aid package to the state-backed enterprises after the IT crackdown roiled Chinese equities in recent days.
Moving on, US ISM Manufacturing PMI for July, expected 60.8 versus 60.6, may reconfirm the soft economic path of the world’s largest economy, which is the need for easy money and further gold strength. However, stronger data may renew USD buying and can extend the latest selling of the commodity. Above all Friday’s US NFP will be the key even as the Fed quietly ignored the tapering talks during the last week’s meeting.
Technical analysis
Gold’s latest pullback from $1,833 portrays an ascending triangle bearish chart formation. However, 100-SMA restricts immediate downside.
Given the downbeat MACD and Momentum, the metal is likely to confirm the bearish chart pattern with a break of an ascending support line from June-end, surrounding $1,802.
It should be noted, however, that a horizontal line from early July could challenge gold sellers around $1,790, a break of which will confirm the double top formation and add strength to the downside momentum targeting the late June’s low near $1,750.
Meanwhile, recovery moves may struggle around $1,820 before confronting the stated double-tops near $1,834.
Though, a clear upside break of the $1,834 key hurdle could trigger a rally targeting the $1,880 theoretical mark.
Overall, gold is up for a short-term pullback but remains range-bound since early July.
Gold: Four-hour chart
Trend: Further weakness expected