• Gold price retraces from three-month highs of $2,120 early Tuesday.
• US Dollar attempts a recovery amid China concerns, despite muted Treasury bond yields.
• Gold price retreat is a good buying opportunity amid a bullish daily technical setup.

As the US Dollar attempts a weak comeback early on Tuesday in the face of a risk-off market environment and sluggish US Treasury bond yields, the gold price is mirroring the corrective moves seen during Monday’s Asian trading.

The price of gold maintains the bullish potential.

The US dollar saw a rush to shelter as a result of China’s disappointing Caixin Services PMI and 2024 GDP growth projection, which caused the gold price to retreat from new three-month highs achieved at $2,120 during the American session on Monday.

According to the most recent data released by Caixin on Tuesday, the Services Purchasing Managers’ Index (PMI) for China surprisingly dropped to 52.5 in February from a reading of 52.7 in January, below the prediction of 52.9. Furthermore, according to Reuters, which cited an official work report, China will almost exactly match last year’s GDP growth target of 5.0% for 2024.

Ahead of Fed Chairman Jerome Powell‘s two-day congressional appearance and the important US employment data, investors are still cautious. They are also keeping an eye on the newest developments around the US presidential election, which is scheduled for November 5. According to Reuters, “Donald Trump received a significant boost on Monday from the US Supreme Court in his bid to win back the presidency.” When it comes to challenging Joe Biden for the Republican nomination, Trump is the front-runner.

But with US Treasury bond yields continuing to struggle and growing expectations of a US Federal Reserve (Fed) interest rate cut in June—especially in light of the US manufacturing sector’s sharp contraction in business activity in February—the US Dollar recovery looks elusive. The ISM Manufacturing PMI index fell on Friday from 49.1 in January to 47.8 in February, much below the market’s projected reading of 49.5.

According to the CME FedWatch Tool, markets are currently pricing in a 30% possibility that the Fed could start easing rates in May, which is slightly higher than a 20% chance from a week ago. The likelihood of a rate reduction for the June meeting is currently at 67%.

Now, all eyes are on the US ISM Services PMI, which will provide gold investors with further motivation as they eagerly anticipate Fed Chair Jerome Powell’s statement on Wednesday for more details on the timing and extent of rate reduction this year.

Gold price technical analysis: Daily– chart

The daily chart shows that the price of gold is heading down towards the 23.6% Fibonacci Retracement (Fibo) level of the most recent rise from the low of $1,984 on February 14 to the three-month high of $2,120, which is aligned at $2,088.

The 14-day Relative Strength Index (RSI) indicator’s overbought conditions may be to blame for the gold price’s decline.

The 21-day Simple Moving Average (SMA) is poised to cross the 50-day SMA upward, indicating an imminent Bull Cross, but the bullish potential in the price of gold is still present.

Traders may view any decline in the price of gold as an excellent opportunity to purchase a dip while the all-time high of $2,144 is still in reach.

On the downside, the previously noted 23.6% Fibo level at $2,088 is challenged before solid support is created around the $2,100 barrier.

Acceptance below the latter is probably going to set off another decline towards the $2,068 38.2% Fibo support level.

In contrast, buyers of gold must persistently reclaim the multi-month high at $2,120 to challenge the $2,130 round number.

At the record high of $2,144, we may observe the following significant obstacle.