Gold Price Forecast: XAU/USD attempts recovery from $1,940 ahead of US Services PMI

• Gold price is making efforts for recovery from $1,940.00 as the focus shifts to US Services PMI.
• After the release of downbeat Manufacturing PMI, weak service sector performance could propel volatility in the USD Index.
• The yields offered on 10-year US government bonds are holding gains above 3.74%.

Gold price (XAU/USD) has defended its downside after a fresh four-day low around $1,940.00 in the New York session. The precious metal is expected to deliver a power-pack action as the United States ISM agency is going to release Services PMI numbers for May.

After the release of the downbeat Manufacturing PMI last week, a downbeat performance from the service sector could propel volatility in the US Dollar Index (DXY). US factory activity reported a seventh straight contraction as firms are failing to cater to their fixed and working capital requirements amid higher interest rates by the Federal Reserve (Fed) and tight credit conditions by US regional banks.

According to the preliminary report, US Services PMI is seen declining to 51.5 vs. the prior release of 51.9. New Orders Index that conveys forward demand is seen advancing to 56.5 against the former release of 56.1.

At the press time, the USD Index has faced marginal pressure while attempting to cross the immediate resistance of 104.40. After the release of upbeat US Nonfarm Payrolls data, it is critical to discuss about interest rate policy from Fed. The investing community will get more clarity after getting inflation figures for May ahead.

Meanwhile, S&P500 are expected to open on a mildly bullish note. US equities are expected to continue Friday’s optimism amid consistent macros. The yields offered on 10-year US government bonds are holding gains above 3.74%.

Gold technical analysis

Gold price witnessed an intense sell-off after a mean-reversion move to near the 200-period Exponential Moving Average (EMA) at $1,977.32 on a four-hour scale. The precious metal is declining toward the key support plotted from March 22 low at $1,934.34.

The Relative Strength Index (RSI) (14) is hovering near the 40.00 threshold. Bearish momentum will get triggered on a breakdown into the 20.00-40.00 range.

Gold four-hour chart