Gold Price Forecast: XAU/USD jumps to fresh multi-week high amid broad-based USD weakness
- Gold turns positive for the fourth straight day and climbs to a fresh multi-week high.
- The prevalent USD selling bias continues to benefit the dollar-denominated commodity.
- Recession fears weigh on investors’ sentiment and also underpin the safe-haven metal.
Gold reverses its early lost ground and turned positive for the fourth successive day on Monday. The momentum pushed the XAU/USD to a fresh three-and-half-week high, around the $1,772-$1,773 region during the first half of the European session on Monday. The post-FOMC US dollar selling bias remains unabated on the first day of a new week, which is turning out to be a key factor benefitting the dollar-denominated commodity.
The Federal Reserve last week sounded less hawkish and hinted that it could slow the pace of the policy tightening campaign at some point amid signs of a slowdown. Adding to this, the disappointing release of the Advance US Q2 GDP report confirmed a technical recession and fueled speculations that the Fed would not hike interest rates as aggressively as previous estimates. This, in turn, exerts some follow-through downward pressure on the USD for the fourth successive day.
Apart from sustained USD selling, the prevalent cautious mood around the equity markets further offers some support to the safe-haven gold. The recent optimistic move in the markets runs out of steam amid growing worries about a global economic downturn. The concerns resurfaced following the disappointing release of the official Chinese Manufacturing PMI for July, which dropped back into contraction territory. This, in turn, tempers investors' appetite for perceived riskier assets.
It, however, remains to be seen if bulls are able to capitalize on the move or opt to take some profits off the table. A goodish rebound in the US Treasury bond yields could limit the USD losses and cap gains for the non-yielding gold. Investors might also refrain from placing aggressive bets ahead of this week's key central bank event risks. The Reserve Bank of Australia (RBA) will announce its policy decision on Tuesday and the Bank of England meeting is scheduled on Thursday.
Apart from this, important US macro data scheduled at the beginning of a new month would further play a key role in determining the next leg of a directional move for gold. A rather busy US economic docket this week kicks off with the release of the ISM Manufacturing PMI on Monday. This, along with the US bond yields, will influence the USD and provide some impetus to spot prices. The focus, meanwhile, would remain on the US monthly jobs report (NFP) on Friday.
Technical levels to watch