Gold Price Forecast: XAU/USD faces selling pressure above $4,200 as US Dollar rebounds

LONDON (December 2) Gold price (XAU/USD) is down 1% to near $4,180.00 during the European trading session on Tuesday. The yellow metal slumps after failing to hold above $4,200 as the US Dollar (USD) bounces back despite weak United States (US) ISM manufacturing Purchasing Managers’ Index (PMI) data for November.

At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 99.55. The USD Index recovered on Monday after revisiting the monthly low around 99.00.Technically, a higher US Dollar makes the Gold price an expensive bet for investors.

On Monday, the US ISM reported that the Manufacturing PMI came in lower at 48.2 from estimates of 48.6 and the prior release of 48.7, signaling contraction in the manufacturing sector activity at a faster pace. A figure below the 50.0 threshold is considered a contraction in the business activity. Also, sub-components of the Manufacturing PMI, such as Employment and New Orders Index, declined at a faster pace.

Broadly, the outlook of the Gold price remains firm as traders seem confident that the Federal Reserve (Fed) will cut interest rates in its monetary policy announcement next week.

According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in December is 86.5%.

This week, investors will pay close attention to the US ADP Employment Change for November and the Personal Consumption Expenditure Price Index (PCE) data for September on Wednesday and Friday, respectively.

FXStreet