Gold Price Forecast: XAU/USD trades just above $1,940, flirts with 100-day SMA support

• Gold price edges lower for the second successive day amid some follow-through US Dollar buying.
• Bets for another 25 bps Fed rate-hike in June push the US bond yields higher and underpin the USD.
• The prevalent risk-on mood contributes to driving flows away from the non-yielding yellow metal.

Gold price edges lower for the second successive day on Monday and remains depressed through the first half of the European session. The XAU/USD is currently placed just above the $1,940 level, with bears awaiting a sustained break through the 100-day Simple Moving Average (SMA) before positioning for an extension of the recent pullback from an all-time peak.

Stronger US Dollar weighs on Gold price

The US Dollar (USD) builds on Friday's rebound from over a one-week low, touched in the aftermath of the mixed employment details from the United States (US), and turns out to be a key factor weighing on the Gold price. It is worth recalling that the headline Nonfarm-Payrolls showed that the US economy added 339K jobs in May, higher than the 294K reported in the previous month and smashing estimates for a reading of 190K. This could allow the Federal Reserve (Fed) to stick to its hawkish stance to bring down stubbornly higher inflation, which continues to push the US Treasury bond yields higher and underpin the USD.

Fed rate hike uncertainty lends some support to XAU/USD

Additional details of the closely-watched US jobs data, however, revealed that the Unemployment Rate rose to 3.7% as compared to an expected uptick to 3.5% from 3.4% in April. Furthermore, Average Hourly Earnings edged lower to 4.3% from 4.4% and pointed to signs of moderating wage growth. This, along with less hawkish remarks by a slew of Fed officials last week, fueled speculations about an imminent pause in the US central bank's rate-hiking campaign. This, in turn, is holding back traders from placing aggressive bearish bets around the non-yielding Gold price and helping limit further losses, at least for the time being.

Risk-on mood should cap any attempted recovery in Gold price

The upside, meanwhile, remains capped amid the prevalent risk-on environment, which tends to undermine traditional safe-haven assets, including the XAU/USD. Investors continue to cheer the optimism over the passage of legislation to lift the government's $31.4 trillion debt ceiling to avert an unprecedented American default. Adding to this, a private-sector survey showed on Monday that China's services activity picked up in May and remains supportive of a generally positive tone around the equity markets. This, in turn, could act as a headwind for the Gold price and warrants some caution for aggressive bullish traders.

Traders now look to US ISM Services PMI for some impetus

Market participants now look forward to the release of the US ISM Services PMI, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to Gold price. Apart from this, the broader risk sentiment might further contribute to producing short-term trading opportunities around the XAU/USD.

Gold price technical outlook

From a technical perspective, some follow-through selling below last week's swing low, around the $1,932 area, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses. The Gold price might then accelerate the downfall towards the $1.919-$1.918 intermediate support before eventually dropping to the $1.900 round-figure mark.

On the flip side, recovery back above the $1,947-$1,949 region is likely to face resistance near the $1.957-$1,958 zone ahead of the $1.983-$1,985 supply zone. The latter should act as a pivotal point, above which a fresh bout of a short-covering could allow the Gold price to reclaim the $2.000 psychological mark and climb to the next relevant hurdle near the $2,010-$2,012 region.

Key levels to watch