Gold Price Forecast: XAU/USD struggles for a firm direction, stuck in a range below $1,960

Gold price continues with its struggle to gain any meaningful traction on Monday and oscillates in a narrow trading band for the second straight day. The XAU/USD currently trades just below the $1,960 level during the Asian session, albeit, so far, has managed to hold its neck above the 100-hour Simple Moving Average (SMA).

Modest US Dollar strength acts as a headwind for Gold price

The US Dollar (USD) edges higher on the first day of the new week and looks to build on Friday's modest recovery from over a one-month low in the wake of the Federal Reserve's hawkish outlook. It is worth recalling that the Fed last week signalled that borrowing costs may still need to rise by as much as 50 bps by the end of this year. This, in turn, is seen as a key factor acting as a headwind for the US Dollar-denominated Gold price.

Federal Reserve rate-hike uncertainty lends support to XAU/USD

The recent softer macro data from the United States (US), however, raised questions over how much headroom the Fed has to keep raising rates. In fact, market participants seem confident that the Fed is almost done with its tightening, which is holding back the USD bulls from placing aggressive bets and lending support to the Gold price. Apart from this, a softer risk tone is seen as another factor underpinning the safe-haven XAU/USD.

Hawkish central banks should continue to cap the upside

Any meaningful upside, meanwhile, still seems elusive amid a more hawkish stance adopted by other major central banks. It is worth recalling that the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) delivered a surprise 25 basis point (bps) rate hike earlier this month. Moreover, the European Central Bank (ECB) last week lifted rates by 25 bps, to the highest level in 22 years, and indicated further tightening to bring down inflation.

The Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike interest rates by 25 bps later this week, which might further contribute to capping the Gold price. In the absence of any relevant macro data and lighter trading volumes on the back of a bank holiday in the US, the mixed fundamental backdrop warrants caution before positioning for any meaningful recovery from a nearly three-month low touched last Thursday.

Gold price technical outlook

From a technical perspective, the 100-day SMA, currently around the $1,942 area, is likely to protect the immediate downside ahead of the $1,932 region and the monthly swing low, around the $1,925-$1,924 zone. Some follow-through selling will be seen as a fresh trigger for bearish traders and make the Gold price vulnerable to accelerate the fall towards the $1,900 round figure. The downward trajectory could get extended further and drag the XAU/USD towards the $1,876-$1,875 horizontal support en route to the very important 200-day SMA, currently around the $1,839 region.

On the flip side, the immediate hurdle is pegged near the $1,962-$1,964 region ahead of the $1,970-$1,972 supply zone. This is followed by the $1,983-$1,985 resistance, above which a bout of a short-covering has the potential to lift the Gold price beyond the $2,000 psychological mark, towards the next relevant barrier near the $2,010-$2,012 region.

Key levels to watch