Gold Price Forecast: XAU/USD climbs back to $1,945 amid bets for Fed rate-hike pause

Gold price attracts fresh buying on the first day of a new week and steadily climbs back above the $1,945 level during the Asian session. The XAU/USD remains well within the striking distance of a one-month high, around the $1,952-$1,953 region touched on Friday and seems poised to build on its recent goodish rebound from over a five-month trough, around the $1,885 zone touched in August.

The mixed monthly jobs report released from the United States (US) on Friday ensured that the Federal Reserve (Fed) will leave interest rates unchanged at its September policy meeting, which, in turn, is seen benefitting the non-yielding Gold price. In fact, the headline NFP showed that the US economy added 187K jobs in August, higher than market expectations. That said, the previous month's reading was revised down from 187K to 157K. Furthermore, the unemployment rate climbed to 3.8% from 3.5% in July and Average Hourly Earnings edged lower to 4.3% on a yearly basis from 4.4%. The data points to a slight deterioration in the labour market and gives the Fed less headroom to keep raising interest rates.

The outlook fails to assist the US Dollar (USD) to capitalize on its strong gains registered over the past two trading days and turns out to be another factor lending support to the Gold price. A softer buck tends to underpin demand for US Dollar-denominated commodities, including the XAU/USD. The downside for the USD, however, remains cushioned as the markets are still pricing in the possibility of one more 25 basis points (bps) Fed rate hike move by the end of this year. This remains supportive of elevated US Treasury bond yields and continues to act as a tailwind for the Greenback. Apart from this, a generally positive tone around the equity markets might contribute to capping gains for the safe-haven precious metal.

Expectations that the Fed is nearing the end of its rate-hiking cycle, along with the optimism over more supportive measures from China to shore up economic growth, continue to boost investors' confidence. In fact, China's top economic planner – the National Development and Reform Commission (NDRC) – said this Monday that it would establish a designated department to bolster the country's faltering private economy. This comes after China increased local dollar liquidity and loosened some mortgage rules last week. In the absence of any relevant market-moving economic releases and a bank holiday in the US, the risk-on flow might hold back traders from placing aggressive bullish bets around the Gold price, at least for now.

Technical levels to watch