Gold forecast: XAU/USD extends rebound post ADP

Gold has been on the front-foot so far this week, with prices taking a boost by weakness in US dollar and a poor ADP report today. Still, the metal has been unable to hit new highs recently despite the renewed dollar selling in recent weeks, calling into question the validity of the bullish trend. Gold prices slipped 2.8% last week, following the breakdown below $3,300 support on Friday. This week, however, prices have bounced back to climb back above the 2025 bullish trend line and support at $3,300, following a brief breakdown. Still, bullish momentum has faded recently with the metal finishing off June essentially flat after closing unchanged in May, too. So, don’t expect a repeat of the first half of 2025 when it comes to gold forecast for the remainder of the year.

 

What factors have prevented gold in achieving new highs?

 

The loss of momentum has been triggered by a few factors, including profit-taking, but more to the point it is undoubtedly reduced demand for haven assets thanks to the sudden de-escalation in the Middle East conflict. The S&P 500 and Nasdaq 100 both hit new highs on Monday before easing back a tad on Tuesday and rebounding against on Wednesday. The rally equity markets could weigh on the appeal of safe haven gold. I reckon a bit of a pullback would not be too bad an outcome as that will allow long term technical overbought conditions on higher time frames to work off, allowing the metal to shine again when macro conditions are more favourable once more.

 

So, while the long-term gold forecast remains positive, in the near-term some weakness should not come as major surprise, particularly if stocks continue rising or if data supports a recovery in the dollar this week. The data released so far this week have been quite mixed, but it is the non-farm payrolls report that will be key. Still, with the metal now back above the bullish trend line it momentarily took out on Friday around $3,300 area, the bears will need a fresh technical signal before we can drop our bullish gold forecast.

 

Focus turns to non-farm payrolls after a poor ADP report

 

This week’s key US macro data including the latest nonfarm jobs report should have at least some influence on the direction of gold prices. The NFP report is indeed the big one. With ISM services and jobless claims also on deck the same day, this could be the make-or-break moment for July rate cut expectations. Another downward surprise, meanwhile, would further boost the appeal of gold. It looks like traders may be betting on a weaker official jobs report after today’s ADP payrolls came out in the negative territory to the surprise of everyone.

 

Technical gold forecast: XAU/USD reclaims 2025 trend line

 

The XAU/USD broke its 2025 bullish trend line around $3,300 area on Friday, before reclaiming on Monday and then there was some further upside follow through since. So, this a key level to watch this week in terms of potential support.

 

Source: TradingView.com

 

With the gold chart having reclaimed this trend line, this is surely a bullish technical development, as it points to a false breakdown and yet another bear trap. The bullish reversal would gather more strength if the metal can now clear decisively the most recent local high of $3350, ideally on the back of the US jobs report on Thursday. If that happens, it could potentially ignite fresh momentum on the long side for it will more or less invalidate the bearish reversal.

 

However, if gold goes back below the trend line and support at $3,300, then in this case a deeper correction in the coming days and week would be a likely scenario. In this scenario, the levels to watch below $3,300 would include:

 

• $3,245/50, marking this week’s low and horizontal support
• $3,200 – the next round handle
• $3,167 – the early April high, which was later reclaimed

 

Beyond the abovementioned levels, the next big support area is around $3,000 – this being a psychologically important handle. Will gold correct this far remains to be seen. But it will first need to drop back below that bullish trend line first.

 

While I wouldn’t bet against the possibility of what some would consider a healthy correction, the current trend direction is bullish. As such, it is imperative that we also prepare ourselves to the possibility of trend resumption. If the bullish momentum gathers pace, the next level of potential resistance is seen around $3,400. Above that? $3,435 is the next and last major hurdle until the all-time high of $3,500.

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R