Gold Price Forecast: XAU/USD trades sideways around $1,900 amid concerns over Fed policy

Gold price (XAU/USD) hovers around the $1,901 mark during the Asian trading session on Wednesday. An upbeat United States (US) Retail Sales have raised concerns over further tightening of monetary policy by the US Federal Reserve (Fed) weighed on Gold price the previous day.

The stronger-than-expected US Retail Sales data for July, with a 0.7% increase compared to the previous reading of 0.3% and beating the market expectation of 0.4%, which indicates a healthier and more robust US economy. This could lead to speculations that the US Federal Reserve (Fed), might consider tightening its monetary policy in the September meeting, which might weaken the appeal of non-interest-bearing assets like Gold.

The concerns about China's weakening economic outlook are putting pressure on Gold's ability to sustain its value. On Tuesday, an unexpected decision by China's central bank to reduce one-year medium-term lending facility (MLF) loans by 15 basis points (bps) to 2.50% from 2.65% prior might intensify the pressure on the price of Gold. Additionally, China’s downbeat July Retail Sales rose 2.5% YoY vs. 4.8% expected and 3.1% previous, as well as the Industrial Production that came in at 3.7% YoY vs. 4.5% estimated and 4.4% prior.

The US Dollar Index (DXY), which measures the strength of the US Dollar (USD) against a basket of six major currencies, continues its winning streak for the fifth consecutive day. Currently, the DXY is trading around 103.20. This upward movement of the US Dollar (USD) is a result of strong economic data originating from the United States (US). Positive economic indicators have the potential to drive up demand for the USD in comparison to the Gold price.