Gold Price Forecast: XAU/USD extends recovery beyond $1,770

• XAU/USD is staging a strong rebound on Thursday.
• Falling US Treasury bond yields seems to be supporting gold.
• US Dollar Index renews multi-month highs above 92.40.

After falling to its lowest level since mid-April at $1,750 on Tuesday, gold managed to stage a decisive recovery on Wednesday and was last seen gaining 0.65% on a daily basis at $1,772.

Despite the broad-based USD strength, the XAU/USD pair didn't have a difficult time pushing higher during the American trading hours with the sharp decline witnessed in the US Treasury bond yields helping gold attract investors. Currently, the benchmark 10-year US T-bond yield is losing nearly 2% on the day at 1.446%.

Additionally, quarter-end flows and rebalancing of large positions may have triggered profit-taking and helped XAU/USD retrace a portion of this week's decline.

Meanwhile, the monthly data published by the Automatic Data Processing (ADP) Research Institute showed on Wednesday that employment in the US private sector increased by 692,000 in June. This reading came in better than the market expectation of 600,000 and provided a boost to the greenback ahead of Friday's Nonfarm Payrolls report. The US Dollar Index, which tracks the USD's performance against a basket of six major currencies, was last seen trading at its highest level in more than two months at 92.41.

In a recently published analysis, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, said gold remains offered below $1,790 and looks to retreat to the key support located at $1,735. 

"While above there we will retain our longer-term upside bias," Jones added. “Longer-term, we still target the $1959/65 November 2020 high and the 2021 high. These guard the $1989/78.6% retracement and the $2072 2020 peak.”

Gold technical outlook

With Wednesday's rebound, the Relative Strength Index (RSI) indicator on the daily chart rose modestly to 35, suggesting that the pair corrected its oversold conditions but doesn't yet have enough bullish momentum for consistent recovery.

On the upside $1,785 (upper limit of last week's consolidation channel) aligns as an interim resistance ahead of $1,790 (100-day SMA) and $1,800 (psychological level, Fibonacci 50% retracement of April-June uptrend).

The initial support is located at $1,750 (June 29 low) ahead of $1,730 (static level).

Additional levels to watch for