Gold Price Forecast: XAU/USD pares daily gains in sharp turnaround, trades above $1,790

• Gold lost its traction after climbing to multi-week highs.
• Renewed USD strength seems to be weighing heavily on XAU/USD.
• Technical outlook suggests sellers are trying to remain in control of gold's action.

The XAU/USD pair managed to close above the 100-day SMA on Monday and extended its rebound on Tuesday. After climbing to its highest level in nearly three weeks at $1,815, however, gold made a sharp U-turn and was last seen posting small daily gains at $1,795.

Earlier in the day, the lack of fundamental developments allowed the precious metal to preserve its bullish momentum with the daily close above the 100-day SMA ramping up the technical buying pressure.

In the second half of the day, the renewed USD strength forced XAU/USD to turn south. The steep decline witnessed in Wall Street's main indexes after the opening bell caused the greenback to attract investors in the early American session. Reflecting the USD's upbeat performance, the US Dollar Index advanced toward the multi-month high it set at 92.74 last week.

On the other hand, the more-than-4% loss seen in the benchmark 10-year US Treasury bond yield is helping gold limit its losses for the time being.

The only data from the US showed on Tuesday that the business activity in the US service sector continued to expand at a robust pace in June with the ISM Services PMI arriving at 60.1. On a negative note, this marked the lowest reading since February, which was also weaker than the market expectation of 63.5. Further details of the publication revealed that input price pressures remained high during that period as the Prices Paid component came in at 79.5.

On Wednesday, the FOMC will release the minutes of its June meeting and investors will be looking for fresh clues regarding the timing of tapering. Several FOMC policymakers voiced their support for tapering to start before the end of the year and if the FOMC's statement reaffirms that view, the USD rally could pick up, pull XAU/USD lower and vice versa.

Gold technical outlook

Despite the impressive upsurge witnessed earlier in the day, the Relative Strength Index (RSI) indicator continues to stay below 50, suggesting that sellers are trying to remain in the picture. However, buyers could try to retain control in case the precious metal makes a daily close above $1,800 (psychological level, Fibonacci 50% retracement of April-June uptrend) after successfully holding above $1,790 (100-day SMA). Above that level, the next resistance is located at $1,805 (20-day SMA) ahead of $1,815 (daily high).

On the downside, the initial support is located at $1,790 before $1,770 (Fibonacci 61.8% retracement) and $1,750 (June 29 low).