Gold Price Forecast: XAU/USD remains on the defensive amid reviving US Dollar demand

• Gold price struggles to gain any meaningful traction and oscillates in a range on Monday.
• Elevated US bond yields help revive the US Dollar and act as a headwind for the metal.
• The uncertainty over the Federal Reserve’s future rate hike path could limit the downside.

Gold price kicks off the new week on a subdued note and oscillates in a narrow trading band, around the $1,925 region through the Asian session. The XAU/USD, meanwhile, remains confined well within a familiar range held over the past three weeks or so as traders seem reluctant to place fresh directional bets amid the uncertainty over the Federal Reserve's (Fed) future rate hike path.

Reviving US Dollar demand weighs on Gold price

The persistently strong wage growth and a slight drop in the unemployment rate pointed to still tight labor market conditions in the United States (US). The data ensures that the Federal Reserve (Fed) will resume raising interest rates at its upcoming policy meeting on July 25-26, which remains supportive of elevated US Treasury bond yields. In fact, the rate-sensitive two-year US government bond stands tall near its highest since June 2007, while the benchmark 10-year US Treasury yield is holding steady above the 4.0% threshold. This helps revive the US Dollar (USD) demand and turns out to be a key factor acting as a headwind for the Gold price.

Reduced bets for more rate hikes lend support to XAU/USD

The closely-watched Nonfarm Payrolls (NFP) report, however, showed on Friday that the US economy added 209K jobs in June, marking the fewest in 2-1/2 years and signalling that the job market is cooling. This could allow the Fed to soften its hawkish stance, which holds back the USD bulls from placing aggressive bets and should offer some support to the Gold price. Apart from this, worries about a global economic downturn might further contribute to limiting any meaningful slide for the safe-haven precious metal, at least for now. Traders might also prefer to wait on the sidelines ahead of this week's release of the latest US consumer inflation figures.

Focus remains on this week’s US consumer inflation figures

The crucial US Consumer Price Index (CPI) report is due for release on Wednesday and is expected to decelerate further in June. Nevertheless, the data should influence the Fed's near-term policy outlook, which, in turn, will play a key role in driving the USD demand and providing a fresh directional impetus to the Gold price. In the meantime, traders on Monday will take cues from a speech by Fed Governor Michael Barr to grab short-term opportunities in the absence of any relevant market-moving economic releases from the US.

Gold price technical outlook

From a technical perspective, the $1,933-$1,935 region might continue to act as an immediate strong barrier ahead of the 100-day Simple Moving Average (SMA), currently around the $1,948-$1,949 region. A sustained strength beyond the latter might trigger a short-covering rally and lift the Gold price to the $1,962-$1,964 area en route to the $1,970-$1,972 supply zone. The momentum could get extended further, allowing bulls to reclaim the $2,000 psychological mark and testing the $2,010-$2,012 resistance.

On the flip side, the $1,910 area now seems to protect the immediate downside ahead of the $1,900 mark and the multi-month low, around the $1,893-$1,892 region touched in June. A convincing break below the latter will make the Gold price vulnerable to accelerate the downward trajectory towards the very important 200-day Simple Moving Average (SMA), currently around the $1,866-$1,865 zone. The latter should act as a pivotal point, which if broken will be seen as a fresh trigger for bearish traders.

Key levels to watch