Gold Price Forecast: XAU/USD bounces off lows, lacks follow-through amid rate hike jitters
|- Gold recovers a part of its intraday losses amid the emergence of some selling around the USD.
- Aggressive Fed rate hike bets lift the US bond yields and should act as a tailwind for the buck.
- The prospects for more aggressive central banks could also contribute to capping the XAU/USD.
Gold attracts some buying in the vicinity of the $1,640 level on Thursday and recovers a major part of its early lost ground. The XAU/USD climbs back closer to the weekly high touched the previous day and is trading around the $1,655 region during the early North American session, still down over 0.30% for the day.
The US dollar struggles to preserve its intraday gains and drops to a fresh daily low in the last hour, which turns out to be a key factor offering support to the dollar-denominated gold. The USD downtick could be solely attributed to a goodish pickup in demand for the British pound, though a combination of factors could help limit deeper losses.
Investors seem convinced that the Federal Reserve will continue to hike interest rates at a faster pace to combat stubbornly high inflation. The bets were reaffirmed by the recent hawkish comments by a slew of FOMC officials. This, in turn, triggers a fresh leg up in the US Treasury bond yields and should act as a tailwind for the greenback.
Furthermore, the prospects for a more aggressive policy tightening by other major central banks might also contribute to capping the upside for the non-yielding gold. This makes it prudent to wait for strong follow-through buying before confirming that the XAU/USD has formed a near-term bottom and positioning for any further appreciating move.
That said, the prevalent risk-off mood, amid growing worries about a deeper global economic downturn and geopolitical risk, could extend support to the safe-haven precious metal. The mixed fundamental backdrop warrants some caution for aggressive traders and placing fresh directional bets around gold.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.