Gold Price (XAU/USD) Faces Headwinds Amid Strong US Dollar and China Concerns

Gold Price (XAU/USD) remains under pressure, ending a two-day winning streak as it grapples with the impact of a robust US Dollar and growing apprehensions over China's economic developments.

Arslan Butt•Tuesday, August 1, 2023•2 min read

GOLD Price (XAU/USD) remains under pressure, ending a two-day winning streak as it grapples with the impact of a robust US Dollar and growing apprehensions over China’s economic developments.

The US Dollar Index (DXY) climbs to a three-week high, supported by rebounding Treasury bond yields, despite mixed US activity data. The surge in DXY and yields is partly attributed to hawkish remarks from Federal Reserve Bank of Chicago President Austan Goolsbee. Additionally, concerns of escalating US-China tensions, with China’s announcement of limiting drone exports citing “national security” measures, are bolstering the US Dollar’s strength.

Notably, China’s Caixin Manufacturing PMI for July falls to 49.2, marking the lowest level since January, impacting GOLD Price as China represents a significant XAU/USD market.

On the other hand, measures from China’s state planner National Development and Reform Commission (NDRC) to promote high-quality development of private investment and boost consumption have offered some support to the XAU/USD price.

The market is also closely monitoring upcoming US ISM Manufacturing PMI for July and JOLTS Job Openings for June, which may influence GOLD Price movement.

From a technical perspective, GOLD Price is retreating from the top of the $1,950 to $1,970 trading range ahead of crucial data releases this week. The lower band of the Bollinger, Pivot Point one-day S1, and Fibonacci 23.6% on one week near $1,952 serve as a key support level. Further down, a combination of Pivot Point one-week S1, one-day S2, and the 200-SMA on 4H can act as a strong defense around $1,940.

To the upside, the 5-DMA and middle band of the Bollinger on the 4H timeframe limit immediate gains near $1,962. However, attention is focused on the critical resistance zone of $1,969-70, comprising Fibonacci 61.8% on one week, 100-DMA, and Fibonacci 23.6% on one-day and one-month. A breakthrough above this hurdle may lead GOLD Price to test a multi-day-old horizontal resistance zone near $1,985, with the ultimate target being the psychological magnet of $2,000.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.