Gold Price Forecast: XAU/USD trades with modest gains above $1,815 amid weaker US Dollar

Gold price edges higher on Thursday, albeit lacks any follow-through buying and remains confined well within the previous day's broader trading range. The XAU/USD currently trades just above the $1,815 level and seems vulnerable to prolonging its downward trajectory witnessed since early February.

Weaker US Dollar, recession fears lend support to Gold price

The US Dollar (USD) bulls opt to take some profits off the table following the recent strong bullish run to over a three-month top. This, in turn, is seen as a key factor lending some support to the US Dollar-denominated Gold price. Apart from this, a generally softer risk tone - amid looming recession risks - benefits traditional safe-haven assets and acts as a tailwind for the XAU/USD. The upside, however, remains capped amid the prospects for more aggressive policy tightening by the Federal Reserve (Fed).

Hawkish Federal Reserve expectations cap gains for Gold price

In fact, the markets are now pricing a greater chance of a 50 basis points (bps) lift-off at the next Federal Open Market Committee (FOMC) meeting on March 21-22. The bets were reaffirmed by hawkish comments by Fed Chair Jerome Powell on Wednesday, reiterating that interest rates would have to go higher and possibly faster to tame stubbornly high inflation. This remains supportive of elevated US Treasury bond yields and keeps a lid on any meaningful gains for the non-yielding Gold price.

Focus remains on Friday’s jobs data from United States

Hawkish Fed expectations, meanwhile, should help limit the downside for the USD, which, in turn, warrants some caution before placing bullish bets around the XAU/USD. Traders might also prefer to move to the sidelines and await the release of the closely-watched monthly jobs data from the United States (US) - popularly known as NFP - on Friday. Hence, strong follow-through buying is needed to confirm that the Gold price has formed a bottom near the $1,800 mark and positioning for a further appreciating move.

Thursday’s US macro data could provide some impetus

Market participants now look to the US economic docket, featuring the release of Challenger Job Cuts and the usual Weekly Initial Jobless Claims data later during the early North American session. This, along with the US bond yields, should influence the USD price dynamics. Apart from this, the broader risk sentiment could provide some impetus to Gold price. The fundamental backdrop, however, favours bearish traders and suggests that the path of least resistance for the XAU/USD is to the downside.

Gold price technical outlook

From a technical perspective, bearish traders need to wait for a sustained break below the $1,800 round figure, which coincides with the 100-day Simple Moving Average (SMA), before placing fresh bets. The gold price might then accelerate the fall towards testing the next relevant support near the $1,775 horizontal zone before eventually dropping to the $1,740-$1,738 region.

On the flip side, any subsequent move beyond the overnight swing high, around the $1,824 area, could attract fresh sellers near the $1,835 horizontal zone. A sustained strength beyond the latter could trigger a short-covering rally and lift Gold price towards the monthly peak, around the $1,858 region. This is followed by the 50-day SMA barrier, currently near the $1,869 region, which should keep a lid on any further gains, at least for the time being.

Key levels to watch