With the current recovery to $1,786 on early Tuesday morning in Europe, gold is struggling to overcome daily losses. The metal’s corrective drop might be attributed to the market’s cautious optimism and recently low rates. However, hawkish Fed predictions and a cautious mindset ahead of Wednesday’s US Consumer Price Index (CPI) look to recently pose a challenge to yellow metal purchasers.

The current slight market optimism might be attributed to China’s positive July vehicle sales figures. According to the China Automobile Manufacturers Association, the dragon nation increased passenger car sales by 20.1 percent year on year in July. However, given Beijing’s position as one of the world’s top gold purchasers, the news impacted the XAU/USD price twofold.

Furthermore, US 10-year Treasury rates are unchanged at approximately 2.75 percent after falling roughly seven basis points (bps) on Monday and rising 14 bps on Friday. The same challenges the US Dollar Index (DXY) ahead of the second quarter of US Nonfarm Productivity and Unit Labor Costs (Q2). Forecasts indicate that US Nonfarm Productivity will rise to -4.6 percent from -7.3 percent before, while Unit Labor Costs will fall to 9.5 percent from 12.6 percent.

However, about 70% of Fed fund futures forecast a 75 basis point rate rise in September, joining Friday’s strong US employment report and hawkish Fedspeak to challenge gold purchasers. In the same vein, the US-China spat over Taiwan and the global economic downturn. Following Wall Street’s mixed performance, the S&P 500 Futures print minor gains around 4,150 by press time.

Given the availability of second-tier US job figures, the gold XAU/USD price may stay underwhelming ahead of the report. However, the US CPI and the aforementioned risk drivers will receive special attention for unambiguous directions.

Gold Technical Outlook

The gold price has stopped falling at the bullish channel’s support line on the chart, and the EMA50 has met this level to lend strength to it, while stochastic is now clearly positive.

As a result, we feel that the odds are good for the projected bullish trend to restart in the next period, with the first key objective at 1802.80, reminding you that the continuation of the bullish wave is dependent on price stability above 1755.70.

Today’s trading range is likely between 1760.00 support and 1795.00 resistance.

Today’s predicted trend: Bullish