Gold Price Forecast: XAUUSD struggles to capitalize on modest recovery from YTD low

Gold Price edged higher on Thursday and for now, seems to have snapped a three-day losing streak to its lowest level since September 2021, around the $1,732 area touched overnight. The XAUUSD held on to its modest recovery gains through the first half of the European session and was last seen trading near the $1,744-$1,745 region.

The US dollar witnessed some profit-taking which, in turn, was seen as a key factor that offered some support to the dollar-denominated gold. The attempted recovery, however, lacked bullish conviction and runs the risk of fizzling out quickly amid hawkish Fed expectations.

The markets seem convinced that the Fed would retain its aggressive policy tightening path to combat stubbornly high inflation. The bets were reaffirmed by the unsurprisingly hawkish minutes of the June 14-15 FOMC meeting, where policymakers emphasized the need to fight inflation even if it results in an economic slowdown.

Policymakers indicated that another 50 or 75 bps rate hike is likely at the July meeting. This, along with some follow-through recovery in the US Treasury bond yields, should act as a tailwind for the USD. Apart from this, a positive risk tone might further contribute to capping any meaningful upside for the safe-haven gold.

The fundamental backdrop still seems tilted firmly in favour of bearish traders and supports prospects for the emergence of fresh selling at higher levels. Hence, it would be prudent to wait for strong follow-through buying before confirming that Gold Price have formed a near-term bottom and positioning for any meaningful gains.

Market participants now look forward to the US Weekly Initial Jobless Claims, due later during the early North American session. This, along with Fed Governor Christopher Waller and St. Louis Fed President James Bullard's scheduled speeches, will influence the USD price dynamics and produce short-term opportunities around gold.

Technical levels to watch