Gold Price Forecast: XAU/USD flirts with three-week high, trades above $1,945 level

Gold price attracts some buying for the fourth successive day on Thursday and climbs back above the $1,945 level during the Asian session, closer to a four-week high touched the previous day. The XAU/USD might now look to build on its recovery from the lowest level since March 13, around the $1,885 region touched last week.

The US Dollar (USD) languishes near a two-week low touched in the aftermath of the disappointing macro data from the United States (US) released on Wednesday and turns out to be a key factor acting as a tailwind for the Gold price. In fact, Automatic Data Processing (ADP) reported that the US private sector employers added 177K jobs in August, much lower than the previous month's downwardly revised reading of 324K and missing expectations for a reading of 195K. Adding to this, the second estimate showed that the US economy expanded by a 2.1% annualized pace in the second quarter against the 2.4% growth reported originally.

Against the backdrop of a fall in the Conference Board's Consumer Confidence Index from 114.0 to 106.1 in August, the data reaffirms market expectations that the Federal Reserve (Fed) will pause its rate-hiking cycle in September. This continues to exert some pressure on the US Treasury bond yields, which keeps the USD bulls on the defensive and benefits the non-yielding Gold price. Apart from this, worries about a deeper global economic downturn further seem to lend additional support to the safe-haven precious metal, though a positive risk tone might keep a lid on any further gains, at least for the time being.

Traders might also prefer to move to the sidelines ahead of the release of the US PCE Price Index – the Fed's preferred inflation gauge – later during the early North American session. The markets are still pricing in the possibility of a 25 basis points (bps) lift-off by the US central bank in 2023. Hence, the data will influence expectations about the Fed's rate-hike path, which, in turn, will drive the USD demand and provide a fresh impetus to the US Dollar-denominated Gold price. Barring any positive surprise from the US inflation data, the fundamental backdrop suggests that the path of least resistance for the XAU/USD is to the upside.

Technical levels to watch