Gold Price Forecast: XAU/USD taps $1,800 mark for the first time since July 5

Gold attracts some dip-buying near the $1,783 area on Tuesday and climbs to a five-week high during the early North American session.

Bulls now await sustained strength beyond the $1,800 mark amid modest US dollar weakness, which tends to underpin the dollar-denominated commodity. The New York Fed's monthly survey on Monday showed that the outlook for US inflation fell sharply in July. This, in turn, suggests that inflation in the US may have peaked last month, which turns out to be a key factor exerting pressure on the buck for the second straight day.

Apart from this, the prevalent cautious mood offers additional support to the safe-haven gold. The market sentiment remains fragile amid growing worries about a global economic downturn. Furthermore, the US-China tensions over Taiwan keep investors on edge. This is evident from a generally weaker tone around the equity markets, which further benefits the precious metal, though hawkish Fed expectations could cap any further gains.

Against the backdrop of the recent hawkish remarks by several FOMC officials, Friday's upbeat US jobs data fueled speculations that the Fed would retain its aggressive policy tightening path. In fact, the current market pricing points to a 70% chance for a larger, 75 bps Fed rate hike move at the September meeting. This, along with a goodish pickup in the US Treasury bond yields, could cap the upside for the non-yielding yellow metal.

Investors might also refrain from placing aggressive bets and prefer to move on the sidelines ahead of the crucial US consumer inflation figures, due on Wednesday. The US CPI report would provide fresh clues about the Fed's policy outlook, which should influence the USD and gold prices in the near term. This, in turn, warrants caution before positioning for any further gains amid absent relevant market-moving US economic data on Tuesday.

Technical levels to watch