Gold Price Forecast: XAU/USD bears flirt with $1,700 ahead of US PMI, NFP

• Gold price dribbles after refreshing six-week low earlier in the day.
• Risk-aversion, firmer yields underpin US dollar ahead of the key data.
• China-linked headlines exert additional downside pressure on the XAU/USD.

Gold price (XAU/USD) holds lower ground near $1,707, after refreshing the 1.5-month low, during the early European morning on Thursday. In doing so, the yellow metal appears to struggle between the technical signals and the fundamentals.

That said, the technical analysis hints at a short-term rebound amid RSI divergence while the fundamentals suggest risk-aversion, a firmer US dollar and the pessimism about China weighing on the XAU/USD prices.

While portraying the mood, US 10-year Treasury yields refresh a two-month high of around 3.21% while the two-year bond coupons jump to the highest levels since 2007, near 3.20% and 3.50% respectively at the latest. Also portraying the sour sentiment is the S&P 500 Futures’ 0.56% intraday fall to the lowest levels since late July, at 3,930 by the press time.

Among the key catalysts, hawkish Fedspeak despite the softer US ADP Employment Change gained major attention as it fuels the market bets over the Fed’s aggressive rate hikes in September. As highlighting the hawkish bias, the CME’s FedWatch Tool signals a 74.0% chance of a 75 basis points Fed rate hike in September, versus 73.0% the previous day. Additionally, Reuters mentioned that Eurozone money markets now price in a roughly 80% chance of a 75 basis-point ECB rate hike next week, versus just over 50% on Wednesday.

Elsewhere, the grim covid conditions in China and the Sino-American tussles over Taiwan, as well as downbeat China Caixin Manufacturing PMI, appear to exert more downside pressure on the sentiment, mainly due to China’s status as one of the biggest gold consumers.

Moving on, the risk catalysts and movements of the bond market, as well as interest rate futures, will be crucial for gold traders to watch for fresh impulse. Additionally, the US ISM Manufacturing PMI for August, expected 52.8 versus 52.0 prior, can direct XAU/USD traders ahead of Friday’s US Nonfarm Payrolls (NFP).

Technical analysis

Gold price bounces off the support line of the weekly bearish channel amid an oversold RSI (14) on the hourly. The rebound also takes clues from the bullish divergence as the prices make lower low but the RSI prints higher low.

Even so, the recovery remains elusive until the quote remains below the $1,715 resistance confluence including the stated channel’s upper line and the support-turned-resistance from August 22.

Following that, a run-up towards the 200-HMA level near $1,738 can’t be ruled out.

Meanwhile, the stated channel’s support line, at the $1,700 round figure restricts the quote’s immediate downside, a break of which could quickly direct the XAU/USD bears towards the yearly low surrounding $1,680.

Gold: Hourly chart

Trend: Corrective rebound expected