Gold Price Forecast: XAU/USD slides towards $1,750 as Fed, Taiwan concerns favor DXY bulls

• Gold price extends Friday’s pullback from monthly high, holds lower ground of late.
• Market sentiment sours on US-China tussles over Taiwan, hawkish Fed bets.
• US employment numbers renewed hopes of the Fed’s aggression, July’s CPI will be crucial for clear directions.

Gold price (XAU/USD) remains pressured near $1,773, down 0.10% intraday, as risk-aversion underpins the US dollar’s safe-haven demand during Monday’s Asian session. Also keeping the greenback buyers hopeful are the recently increased hopes of the Federal Reserve’s (Fed) 0.75% rate hike in September.

The sour sentiment could be gauged from the S&P 500 Futures’ losses of around 4,138, as well as the mixed performance of the US 10-year Treasury yields near 2.3%. It’s worth noting that Wall Street benchmarks closed negative and the US 10-year Treasury yields rallied to 2.83%, up 14 basis points (bps), to renew the US dollar strength.

The US Dollar Index (DXY) remains firmer around 106.75, up 0.15% intraday while extending Friday’s recovery moves at the latest. A strong US employment report for July underpinned hawkish Fed bets and recalled the US dollar bulls the previous day. That said, the headline Nonfarm Payrolls (NFP) rose to 528K versus 250K expected and 398K upwardly revised prior. Further, the Unemployment Rate also inched lower to 3.5% compared to 3.6% expected and previous readings.

It should be noted that San Francisco Fed President Mary Daly said during the weekend that the Fed is far from done in combating inflation. The policymaker also added, “50 bps increase is definitely in play. We need to keep an open mind.”

Also keeping the greenback buyers hopeful is the US-China tussles surrounding Taiwan. Reuters came out with the news suggesting that China is up for ‘regular’ military drills east of the Taiwan Strait median line. That said, the dragon nation’s Foreign Ministry announced on Friday that they will sanction US House of Representative Speaker Nancy Pelosi over the Taiwan visit. On the other hand, Taiwan's Defense Ministry reported 66 Chinese aircraft conducting activities in the Taiwan Strait as of 5 pm local time on Sunday. Further, US Secretary of State Anthony Blinken mentioned that China's provocative actions were a significant escalation.

During the weekend, China’s trade numbers for June marked upbeat results with the Exports rising the most in the year. That said, the headline Trade Balance rose to $101.26B versus $90B forecasts and $97.94B. Further details suggest that Exports increased by 18% compared to 15% expected and 17.9% prior whereas the Imports eased to 2.3% compared to 3.7% expected and 1.0% prior. Given the dragon nation’s status as one of the world’s top gold consumers, firmer trade numbers appeared to have probed the XAU/USD bears of late.

Moving on, a light calendar ahead of Wednesday’s US Consumer Price Index (CPI) could trouble momentum traders, which in turn highlights the risk catalysts for fresh impulse.

Technical analysis

Gold price directs the previous day’s U-turn from the 50-DMA hurdle towards the two-week-old support line, around $1,767 by the press time.

Given the recent RSI retreat and the MACD line’s sustained move in the negative zone, XAU/USD is likely to break the immediate trend line support.

However, the 21-DMA level surrounding $1,738 could challenge the metal sellers before directing them to the yearly low of $1,680.

Alternatively, upside clearance of the 50-DMA resistance surrounding $1,788 isn’t an open invitation to the gold buyers as the downward sloping resistance line from May appears a crucial hurdle towards the north, close to $1,832-33 by the press time.

Gold: Daily chart

Trend: Further weakness expected