Gold Price Forecast: XAU/USD holds steady above $1,915 level amid modest USD downtick

Gold price builds on Friday's late rebound from the $1,904-$1,903 area and edges higher during the Asian session on the first day of a new week, though lacks bullish conviction. The XAU/USD currently trades around the $1,916 region, up less than 0.10% for the day, and remains below a two-week high touched last Thursday.

The US Dollar (USD) kicks off the new week on a softer note and moves away from its highest level since early June, which, in turn, is seen as a key factor benefitting the Gold price. A softer Greenback tends to benefit the US Dollar-denominated commodities, including the XAU/USD. That said, the prospects for further policy tightening by the Federal Reserve (Fed) hold back traders from placing aggressive bullish bets around the non-yielding Gold price and keep a lid on any further gains, at least for the time being.

In a keynote address at the Jackson Hole Symposium, Fed Chair Jerome Powell said on Friday that the US central bank may need to raise interest rates further to cool still-too-high inflation. He added that policymakers would proceed carefully as they decide whether to tighten further or to hold the interest rate constant. This reaffirms market bets for one more 25 basis point (bps) lift-off by the end of this year, which remains supportive of elevated US Treasury bond yields and continues to lend support to the USD.

Apart from this, the risk-on impulse, triggered by new measures announced by China over the weekend, might further contribute to capping the safe-haven Gold price. It is worth recalling that China on Sunday announced a reduction in the stamp duty on stock trading to boost the struggling market and revive investor confidence. The finance ministry said in a brief statement that the levy charged on stock trades will drop from 0.1% to 0.05% as of August 28, the first reduction since 2008. This remains supportive of a generally positive tone around the equity markets and might hold back bulls from placing fresh bets around the XAU/USD.

Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Monday, leaving the Gold price act at the mercy of the USD price dynamics and the broader risk sentiment. Any meaningful move in either direction, meanwhile, is more likely to be limited ahead of this week's important US macro releases, including the closely-watched Non-Farm Payrolls (NFP) report on Friday. This makes it prudent to wait for strong follow-through buying before positioning for an extension of the recent goodish recovery from the $1,885 area, or the lowest level since March 13 touched last week.

Technical levels to watch