Gold Price Forecast: XAU/USD reverses to near $1,840 despite higher odds of a hawkish July

• Gold price has recovered its opening losses and has reclaimed $1,840.00.
• Investors should brace for a longer time period for bringing price stability.
• The precious metal remained weak after it failed to sustain above 61.8% Fibo retracement.

Gold price (XAU/USD) has rebounded sharply after slipping below the potential cushion of $1,840.00. On a broader note, the precious metal is eyeing more downside as the Federal Reserve (Fed) is expected to announce a consecutive 75 basis point (bps) rate hike in its July monetary policy. The precious metal has displayed selling pressure at open and a follow-up selling is highly likely after a slippage below Friday’s low at $1,833.90.

Comments from Fed policymakers on price pressures and it's whatever it takes’ attitude of bringing price stability will have a major impact on the gold prices for a prolonged period. Cleveland Fed Bank President Loretta Mester in her interview with CBS News on Sunday dictated that the price pressures won’t get trimmed overnight. It will take a period of two years but will get back in its neutral state.

Meanwhile, the US dollar index (DXY) is facing barricades at around 104.80. The DXY’s rally saw exhaustion signals last week after hitting a multi-year high of 105.79. A correction after recording a multi-year high of 105.79 is followed by a minor reversal, however, volatility is likely to stay ahead of the PMI numbers. The US Composite PMI is seen a little higher at 53.7 against the prior print of 53.6.

Gold technical analysis

On an hour scale, the gold prices have witnessed a steep fall after failing to sustain above 61.8% Fibo retracement (which is placed from June 12 high at $1,879.26 to June 14 low to $1,805.11) at $1,851.09. The 20- and 50-period Exponential Moving Averages (EMAs) at $1,841.54 and $1,839.76 respectively are expected to display a bearish crossover, which will strengthen the gold bears. Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range and may slip below 40.00, which will trigger a fresh selling leg.

Gold hourly chart