• Gold price picks up bids to reverse the week-start loss, renews intraday high of late.
• DXY struggles amid cautious optimism, downbeat PMIs, ignores hawkish Fed bets.
• Risk catalysts can entertain XAU/USD buyers ahead of Thursday’s US Q3 GDP.

Gold price (XAU/USD) renews its intraday high around $1,653, reversing the previous day’s pullback from a one-week top, as a softer US dollar favors the metal buyers during Tuesday’s Asian session.

That said, the US Dollar Index (DXY) remains on the back foot around 111.85, taking rounds to intraday low while struggling to extend the week-start gains amid the cautious optimism in the market and the downbeat US data, as well as an absence of Fedspeak.

It should be noted, however, the downbeat yields and mildly positive stock futures add strength to the XAU/USD’s recent run-up.

The US 10-year Treasury yields remain pressured around 4.21%, down two basis points (bps), while the S&P 500 Futures track Wall Street’s gains to print a mild 0.20% intraday upside.

The recent optimism surrounding the UK and the EU’s economies seemed to have joined the absence of the Fed policymakers’ speech seemed to have favored the XAU/USD prices. On the same line could be the downbeat US data.

Ex-Chancellor’s victory in the UK Prime Minister’s race joins the mildly positive German Services PMI for October, despite being in the contraction zone, keeps the market’s mood positive amid mixed earnings. Also, the latest round of the Fedspeak appeared to have faded the previous hawkish tone and might have been the reason to trigger the chatters over the easy rate hike from December, which in turn favor the cautious optimism and weigh on the DXY.

The US S&P Global PMIs for October suggest that the Manufacturing activities’ gauge dropped to 49.9 versus 51.2 expected and 52.0 prior while its services counterpart slid to 46.6 from 49.3 previous reading and 49.2 market forecasts. With this, the Composite PMI for the said month declined to 47.3 compared to 49.1 anticipated and 49.5 prior.

Alternatively, a jump in the inflation precursors, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, to a two-month high in their latest readings keep the gold bears hopeful. On the same line could be the CME’s FedWatch Tool that prints a nearly 95% chance of a 75 bps Fed rate hike in November.

Looking ahead a light calendar could test XAU/USD buyers amid an absence of the Fed speakers. Though, looming risks to the major economies and likely central bank aggression favors the gold sellers ahead of Thursday’s US Gross Domestic Product for the third quarter (Q3).

Technical analysis

A clear upside break of the previous resistance line from October 06, around $1,625 by the press time, joins upbeat oscillators to direct the gold price towards a convergence of the 100-SMA and the 200-SMA, near $1,670.

However, the hidden bearish divergence portrayed by the lower high on prices and the higher high on RSI (14) challenges the metal’s further upside.

Should the XAU/USD bulls manage to cross the $1,670 hurdle, the mid-month peak around $1,684 can test the upside momentum before directing buyers toward the monthly high near $1,730.

Meanwhile, a one-month-old horizontal support area, around $1,620, acts as an additional downside filter, other than the previous resistance line near $1,625, to challenge the bears trying for a fresh yearly low.

Gold: Four-hour chart

Trend: Limited upside expected