Gold Price Forecast: XAU/USD struggles to extend recovery above 20-day EMA

• Gold price fails to extend its three-day winning streak as the US Dollar rebounds.

• The Fed is highly anticipated to deliver at least one interest rate hike this year.

• Fed Chair Warsh said at the ECB forum that inflation remains too high.

Gold price (XAU/USD) is down 0.8% to near $4,140 during the European trading session on Monday. The precious metal faces selling pressure as the three-day rally hits a pause after failing to extend above $4,203.

Bullions come under pressure as the US Dollar (USD) bounces back after a negative week. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.22% higher to near 101.10.

Technically, a higher US Dollar makes the Gold price an unfavorable risk-reward bet for investors.

Last week, the US Dollar fell sharply after traders slightly trimmed the Federal Reserve’s (Fed) hawkish interest rate expectations, following the release of the United States (US) Nonfarm Payrolls (NFP) data for June. The US NFP report showed that the economy created 57K fresh jobs, significantly lower than estimates of 110K.

According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike by the end of September are 53.2%, down from 59.4% seen a week ago.

However, traders are still increasingly confident that there will be an interest rate hike by the Fed this year.

Higher interest rates by the Fed diminish the appeal of non-yielding assets, such as Gold.

Also, the latest remarks from Fed Chairman Kevin Warsh at the European Central Bank (ECB) Forum in Sintra show that officials are more concerned about inflation than the labor market. Warsh said at the Forum that inflation remains “too high”, and stressed to bring price stability.

Gold technical analysis

XAU/USD trades lower at around $4,143.46, maintaining a bearish near-term bias as it holds beneath both the 20-day Exponential Moving Average (EMA) at roughly $4,171 and the 50-day EMA near $4,344. The dual cluster of overhead EMAs suggests rallies are likely to be capped while price remains lodged below these trend gauges, with the Relative Strength Index (RSI) hovering just under the 50 line and hinting at subdued bullish momentum during any corrective bounces.

On the topside, initial resistance emerges at the 20-day EMA around $4,171, with a stronger barrier at the 50-day EMA near $4,344, where sellers could look to reassert control if the metal extends a recovery. On the downside, the Gold price could resume its downside journey if it fails to hold the June low of $3,941.76. A break below $3,941.76 would expose the Gold price to $3,900, followed by the September 25 low near $3,722.

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)