Gold Price Forecast: XAU/USD bears eye $1,787 as recession fears amplify ahead of US ISM PMI

• Gold Price dribbles around seven-week low as bears attack nearby support amid oversold RSI.
• Yields extend south-run, US dollar regains upside momentum as fears of economic slowdown intensify.
• US ISM Manufacturing PMI, updates surrounding inflation, recession will be important.

Gold Price (XAU/USD) stands on slippery grounds as it slides to the lowest levels since early May, around $1,797 by the press time of early Friday morning in Europe. In doing so, the yellow metal drops for the fifth consecutive day amid fears of escalating inflation and economic slowdown.

The risk-off mood takes clues from the recent supply crunch and allying prices, mainly due to the Russia-Ukraine crisis, as well as due to China’s covid resurgence.

The sour sentiment directs markets toward the US dollar and bond-buying, which in turn drown Gold Price. That said, the US Dollar Index (DXY) picks up bids to reverse the previous day’s pullback from a two-week top as market sentiment worsens over growth fears. The DXY reversed from a 12-day high to snap a two-day uptrend by the end of Thursday’s trading around 104.75, near 104.80.

On Thursday, the downbeat US personal spending and softer prints of the Fed’s preferred inflation gauge raised concerns over the health of the world’s largest economy and drowned the US dollar. The greenback’s previous retreat could also be linked to the downbeat US Treasury yields as the benchmark 10-year bond coupons dropped below 3.0%, before recovering to 3.01% at the closing, to portray around 50 basis points (bps) of a fall from June’s peak.

While portraying the mood, the S&P 500 Futures drop 0.80% to mark a five-day downtrend whereas the US 10-year Treasury yields reverse early Asian session rebound to 2.967%, refreshing the three-week low.

Moving on, risk catalysts are the key for gold traders to watch while also keeping eyes on the US ISM Manufacturing PMI for June, expected 55.0 versus 56.1 prior, as well as risk catalysts, for fresh impulse. Also important will be the initial readings of the Eurozone key inflation gauge, Harmonised Index of Consumer Prices (HICP), for June.

Also read: ISM Manufacturing PMI Preview: High inflation component steal the show, boost dollar

Technical analysis

Gold Price remains on the back foot after breaking one-month-old horizontal support surrounding $1,807. Adding strength to the bearish bias is the downside break of the $1,800 threshold.

That said, a south-run towards $1,786 appears imminent before the bears can aim for a one-month-old descending support line near $1,775.

Meanwhile, corrective pullback needs validation from the $1,807 support-turned-resistance to aim for the three-week-old descending trend line, at $1,825 by the press time.

Gold: Four-hour chart

Trend: Further weakness expected