Gold Price Forecast: XAU/USD eyes $1,810-12 hurdle amid weaker US Dollar, recession fears

Gold price regains positive traction on Tuesday and steadily climbs back above the $1,800 mark during the first half of the European session. The XAU/USD is currently placed above a technically significant 200-day Simple Moving Average (SMA) and is supported by a combination of factors.

Recession fears underpin safe-haven Gold price

Despite the easing of strict COVID-19 restrictions in China, investors remain worried that a surge in new infections in the country could delay a broader reopening of the economy. Adding to this, the protracted Russia-Ukraine war has been fueling concerns about a deeper global economic downturn and weighing on investors' sentiment. This is evident from the prevalent cautious market mood, which, in turn, is driving some flows towards the safe-haven Gold price.

Weaker US Dollar further benefits Gold price

Apart from this, a weaker US Dollar provides an additional boost to the US Dollar-denominated Gold price. The sharp intraday fall in the buck could be solely attributed to the Bank of Japan (BoJ)-inspired strong buying around the Japanese Yen. Apart from this, the USD downfall lacks any obvious fundamental catalyst and is more likely to remain limited, at least for the time being, amid a more hawkish commentary by the Federal Reserve (Fed) last week.

Hawkish central banks could cap Gold price

In fact, the US central bank signalled that it will continue to raise rates to crush inflation. Adding to this, policymakers projected at least an additional 75 bps increases in borrowing costs by the end of 2023. This, in turn, triggers a fresh leg up in the US Treasury bond yields and favours the USD bulls. This, along with the prospects for further tightening by other major central banks, could also contribute to capping gains for the non-yielding Gold price.

The European Central Bank (ECB) last week stressed that significant tightening remained ahead and pledged that rates will be increased again, potentially as many as three times, by the same amount to tame runaway inflation. The Bank of England (BoE) lifted the benchmark rate to its highest level since 2008 and indicated that more hikes were likely. Furthermore, the Swiss National Bank (SNB) Chairman Thomas Jordan said that further tightening was necessary to crush inflation.

Bulls need to wait for move beyond $1,810-$1,812 supply zone

The aforementioned fundamental backdrop makes it prudent to wait for a sustained strength back above the $1,810-$1,812 supply zone before placing fresh bullish bets around Gold price. Nevertheless, the XAU/USD, for now, seems to have found acceptance above the $1,800 mark and remains at the mercy of the USD price dynamics.

Gold price technical outlook

From a technical perspective, some follow-through buying beyond the aforementioned barrier should lift Gold price to a multi-month top, around the $1,824-$1,825 region touched earlier this month. The momentum could get extended further towards the $1,854-$1,855 hurdle en route to the next relevant resistance near the $1,886-$1,887 zone.

On the flip side, dips below the $1,800 mark could attract some buyers near the very important 200-day Simple Moving Average (SMA), currently around the $1,788 area. This is followed by support near the $1,774-$1,773 region, which if broken decisively will negate any positive bias and prompt some technical selling. Gold price might then accelerate the fall toward the $1,766 intermediate support before eventually dropping to the $1,760 level.

Key levels to watch