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XAU/USD Defends $1,800, Focuses on Death Cross, Fed Minutes and US NFP

  • Gold justifies a bearish moving average crossover to extend a three-week decline.
  • Even as Fed hawks pull back, fears of a recession continue to weigh on the downside.
  • Death Cross keeps vendors hoping to refresh less annually but major events await.

Gold prices (XAU/USD) posted mild losses as they tried to defend $1,800 in Monday’s Asian session after falling for the past three weeks. In doing so, the yellow metal justifies a risk-off mood amid fears of a recession but lurking amid the US holiday, as well as a cautious mood ahead of this week’s key data/events.

Recession fears intensified on Friday after the US ISM manufacturing PMI fell to a two-year low. Further geopolitical tensions between Russia and Ukraine and China’s failure to impress buyers add to the risk-off mood.

The US ISM manufacturing PMI fell to a two-year low in June, 53.0 versus 54.9 expected and 56.1 before. Details indicated that the employment index fell to 47.3 from 49.6 and the new orders index fell to 49.2 from 55.1. Finally, the prices paid index fell to 78.5 from 82.2, against market forecasts of 81.0. It should be noted that the final reading of the S&P Global Manufacturing PMI in June fell to the lowest level since July 2020, falling to 52.7 against flash estimates of 52.4 and 57 in May.

In addition, Russia’s claim to full control over Lysychansk and doubts over China’s ability to regain economic transition will have a negative impact on gold prices.

Amid these plays, the US 10-year Treasury yield marked its biggest weekly decline since February while Wall Street benchmarks struggled for clear directions after Friday’s surprise gains. Furthermore, S&P 500 futures were down half a percent by press time to portray a risk-off mood.

Looking ahead, the US Independence Day holiday may constrain XAU/USD moves and ease recently hawkish bets on the Fed’s next moves. However, this week’s Federal Open Market Committee (FOMC) minutes and June’s US jobs report will be crucial to watch.

Also Read: Gold Weekly Forecast: Hopes of recovery fade ahead of US key events

Technical analysis

Gold prices are struggling to defend Friday’s bounce from key horizontal support from late December 2021, as the downward sloping RSI and bearish MACD signals join a moving average crossover that supports sellers, namely the death cross.

A 50-DMA piercing the 200-DMA from above, supported by the aforementioned oscillators, is likely to retest the multi-month-old support area near $1,780 for XAU/USD. However, sellers need validation from immediate resistance support around $1,800.

Following that, a late 2021 downward trajectory around $1,760 could attract bears.

In contrast, a recovery remains elusive until it crosses the downward sloping resistance line from April 18, which is near $1,825 as of press time.

Following that, the 50-DMA and 200-DMA may challenge the gold price at around $1,845, a break of which would be a good sign for the XAU/USD bulls to return.

Gold: Daily Chart

Outlook: Further weakness is expected

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