Gold Price Forecast: XAU/USD sits near one-month peak, seems poised to appreciate further

Gold price trades with a positive bias for the fourth successive day on Friday and hits a fresh one-month high, around the $1,964 area during the Asian session. The intraday uptick, however, lacks bullish conviction, though acceptance above the 100-day Simple Moving Average (SMA) supports prospects for an extension of the recent bounce from the $1,893 region, or a three-and-half-month low touched in June.

Bearish US Dollar continues to underpin Gold price

The US Dollar (USD) languishes near its lowest level since April 2022 in the wake of firming expectations that the Federal Reserve (fed) could end its policy-tightening cycle soon and continues to act as a tailwind for the Gold price. Investors now seem convinced that the Fed will keep interest rates steady after the widely anticipated 25 basis points (bps) lift-off at its July policy meeting. The bets were reaffirmed by data released earlier this week, which showed that consumer prices in the United States (US) moderated further in June. In fact, the US Bureau of Labor Statistics reported that the headline Consumer Price Index (CPI) climbed 0.2% in June and the yearly rate slowed from 4% to 3% - marking the smallest rise since March 2021. Furthermore, the monthly increase in core prices was the smallest since August 2021.

Bets for only one Fed rate hike this year further benefit XAU/USD

Adding to this, the US Producer Price Index (PPI) for final demand rose barely, by a modest 0.1% in June and the previous month's reading was also revised down to show that the gauge fell 0.4% instead of the previously reported 0.3%. In the 12 months through June, the PPI fell from a 0.9% rise in May to 0.1% during the reported month - marking the smallest year-on-year rise since August 2020. This comes on the back of the unimpressive US monthly employment data last Friday, showing that the economy added the fewest jobs in two-and-half-years, which should allow the Fed to soften its hawkish stance. This led to the recent sharp decline in the US Treasury bond yields, which continues to drag the USD lower and remains supportive of the recent rise in the US Dollar-denominated Gold price.

Hawkish comments by Fed's Waller act as headwind for Gold price

That said, an unexpected fall in the US Weekly Initial Jobless Claims last week indicated that the labor market remains tight. Apart from this, the overnight hawkish remarks by Fed Governor Christopher Waller help the US bond yields to stall the downfall, which, in turn, is holding back traders from placing fresh bullish bets around the non-yielding Gold price. Waller said that he supports the Fed hiking by two more quarter percentage point increases this year and sees no reason why the first of those two hikes should not occur at the next meeting later this month. Nevertheless, the aforementioned fundamental backdrop validates the near-term positive outlook for the XAU/USD and remains tilted firmly in favour of bullish traders, suggesting that the path of least resistance is to the upside.

Market participants now look to the release of the Preliminary Michigan US Consumer Sentiment Index, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics on the last day of the week and allow traders to grab short-term opportunities around the Gold price. The XAU/USD, meanwhile, seems poised to end in the green for the second successive week and possibly register its highest weekly close since May.

Gold price technical outlook

From a technical perspective, any subsequent move up is more likely to confront resistance near the $1.970-$1,972 region ahead of the $1,983-$1,984 zone. A sustained strength beyond has the potential to lift the Gold price beyond the $2,000 psychological mark, towards testing the next relevant hurdle near the $2,010-$2,012 area.

On the flip side, the 100-day SMA, currently around the $1,954-$1,953 zone, now seems to protect the immediate downside. This is followed by support near the $1,942 level, below which a bout of technical selling could drag the Gold price further towards the $1,925 region. Some follow-through selling will expose the $1,900 mark before the XAU/USD eventually drops to the multi-month low, around the $1,893 region.

Key levels to watch