XAU/USD threatens key $2,630 support ahead of more Fedspeak

• Gold extended a five-day losing streak early Tuesday despite risk aversion.
• The US dollar retreats with Treasury yields following a smooth Fedspeak speech.
• Gold Price Threatens Key $2,630 Support; will it defend against the upbeat daily RSI?

The price of gold is maintaining its corrective decline early Tuesday, trying to threaten the lower limit of the recent range of $2,630. The focus now remains on tensions in the Middle East, China’s further stimulus rollout and speeches by US Federal Reserve (Fed) policymakers for new directives.

Gold price slips on China’s economic pain

Gold prices are struggling to find a foothold as sellers remain in check amid resurgent concerns about China’s economic outlook as Chinese traders return from a week-long holiday.

Even as Chinese stocks rebounded sharply, no announcements of further stimulus have been made so far and the National Development and Reform Commission’s (NDRC) gloomy outlook for China’s economy has heightened risk aversion in Asia.

China’s state planner, the NDRC, said in its press conference that “downward pressure on China’s economy is increasing.” Therefore, the price of gold remains undermined as China is the world’s largest consumer of gold.

However, the correction in gold prices appears to be cushioned by a broad retreat in the US dollar (USD) alongside US Treasury yields following the Fed Chair’s dovish remarks in St. Louis, Alberto Musalem. Musalem said late Monday that “further gradual cuts in the policy rate will likely be appropriate over time,” adding that “I will not prejudge the size or timing of future policy adjustments.”

His comments fueled a further drop in the USD despite markets ruling out a 50 basis point (bps) Fed interest rate cut next month. Markets are currently pricing in about an 86 percent chance the Fed will opt for a 25 bps rate cut at its next meeting, CME Group’s FedWatch Tool shows.

Looking ahead, speeches by Atlanta Fed President Raphael Bostic and Fed Vice President Philip Jefferson will be closely watched in the absence of any top US economic data later on Tuesday.

Traders will also pay attention to the escalating conflict between Israel and Iran, especially after the Iran-backed militant group Hezbollah fired dozens of rockets into Israel’s third-largest city, Haifa. Meanwhile, the Israeli military has described its recent ground operation in Lebanon as “localized, limited and targeted” but has steadily increased in scale since last week.

Gold Price Technical Analysis: Daily Chart

After a gradual decline over the past four days, gold buyers are challenging the key static support at $2,630.

The 14-day Relative Strength Index (RSI), however, remains well above the median, currently near 62, suggesting that any dip in the gold price could likely be bought.

Gold price needs a daily candlestick close above the strong resistance near $2,670 to cancel short-term downside pressure.

The next resistance is lined up at the record high of $2,686. Above, buyers will target the $2,700 round level.

On the other hand, gold sellers need to break the intermittent low of $2,630 on a daily closing basis to trigger a further correction towards the $2,600 level.

Before this level, the 21-day simple moving average (SMA) at $2,614 could provide temporary relief to buyers.