Gold Price Forecast: XAU/USD approaches monthly support above $1,600 with eyes on US ISM PMI, Fed

• Gold price remains pressured around one-week low, prints four-day downtrend.
• US dollar struggles to extend three-day winning streak amid sluggish yields, mixed sentiment.
• Technical breakdown, hawkish Fed bets keep XAU/USD bears hopeful.

Gold price (XAU/USD) remains depressed for the fourth consecutive day, mildly offered near $1,632 by the press time, as the metal bears struggle for fresh clues during Tuesday’s sluggish start.

The metal’s inaction could be linked to sluggish US Treasury yields amid the market’s indecision ahead of the key central bank announcements, as well as the US employment data. That said, US 10-year Treasury yields remain sidelined near 4.05% by the press time, after rising in the last two consecutive days. It’s worth noting that the bond yields snapped a 10-week uptrend with the previous week’s negative closing. Even so, the bond coupons ended October on a firmer footing while posting the third positive closing.

Furthermore, the downbeat US data and hopes of more easing in the oil prices, and inflation in turn, appeared to have also challenged the XAU/USD bears. On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

Further, comments from US President Joe Biden and Russian leader Vladimir Putin appeared to have also eased the market’s fears and seemed to have probed the gold sellers of late. "US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Amid these plays, Wall Street printed the first daily loss in three but S&P 500 Futures print mild gains at the latest. It should, however, be noted that the CME’s FedWatch Tool signals a nearly 90% chance of the Fed’s 75 basis points of a hike on Wednesday’s all-important Federal Open Market Committee (FOMC) meeting, which in turn keeps the US Dollar buyers hopeful.

Looking forward, the US ISM Manufacturing PMI, likely to ease to 50.0 versus 50.9 prior, will direct immediate XAU/USD moves. Following that, the US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figure, will join the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior, to also entertain the commodity trader.

Technical analysis

A clear downside break of a one-week-old horizontal support, now resistance around $1,638-39, joins bearish MACD signals to direct the gold price towards an upward-sloping support line from the late September, around $1,620 by the press time.

In a case where the XAU/USD drops below $1,620, the latest swing low and the yearly bottom, respectively near $1,617 and $1,614, could entertain the bears before directing them to the 61.8% Fibonacci Expansion (FE) of October 04-26 moves, near $1,605.

Alternatively, an upside break of the $1,620 support-turned-resistance could trigger the yellow metal’s further advances targeting the 100-EMA and 200-EMA, close to $1,655 and $1,670 in that order.

It should be noted, however, that the gold buyers remain cautious unless crossing the late October swing high, around $1,675.

Gold: Four-hour chart

Trend: Further downside expected