Gold Price Forecast: XAU/USD struggles to capitalize on intraday bounce from multi-week low

• Gold price catches some bids on Monday and stages a recovery from a nearly four-week low.
• The prevalent risk-off environment is seen lending some support to the safe-haven commodity.
• Hawkish Fed expectations, rising US bond yields underpin the US Dollar and cap the upside.

Gold price attracts some buyers near the $1,860 region, or a nearly four-week low touched earlier this Monday and sticks to its modest gains through the first half of the European session. The XAU/USD, for now, seems to have snapped a two-day losing streak and stalled the recent pullback from its highest level since April 2022 touched last week.

Risk-off mood benefits safe-haven Gold price

The prevalent risk-off environment - as depicted by a generally weaker tone around the equity markets - turns out to be a key factor lending support to the safe-haven Gold price. The global risk sentiment takes a hit amid fears of worsening US-China relations, especially after Washington’s decision last week to shoot down a Chinese balloon that traversed American airspace. This comes amid concerns about a strong recovery in the Chinese economy and the economic headwinds stemming from the continuous rise in borrowing costs.

Hawkish Fed expectations cap gains for Gold price

That said, a combination of factors holds back bulls from placing aggressive bets around Gold price and keeps a lid on any meaningful upside, at least for the time being. The upbeat monthly jobs report released from the United States (US) on Friday fueled speculations that the Federal Reserve (Fed) will stick to its hawkish stance for longer. This, in turn, pushes the US Treasury bond yields higher, which underpins the US Dollar (USD) and acts as a headwind for the non-yielding yellow metal, at least for the time being.

Stronger US Dollar also acts as headwind for Gold price

In fact, the USD Index, which tracks the Greenback against a basket of currencies, is seen building on Friday's post-NFP strong recovery from a nine-month low. This might further contribute to capping gains for the US Dollar-denominated Gold price. Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent corrective decline from a multi-month top has run its course. Furthermore, absent relevant market-moving economic data warrants caution before positioning for any further upside.

Gold price technical outlook

From a technical perspective, Gold has decisively broken below a multi-month trendline drawn from the November 2022 lows, which suggests the short-term trend has now swung bearish and further weakness is more likely than not.  A further break below the multi-week low, at around the $1,860 region, could drag the Gold price to the $1,825 horizontal support en route to the $1,800 round-figure mark. This is followed by the very important 200-day Simple Moving Average (SMA), currently around the $1,776-$1,775 area. The latter should act as a pivotal point, which if broken decisively should set the stage for a deeper corrective decline.

On the flip side, any subsequent move up is likely to confront some resistance near the $1,890-$1.892 zone ahead of the $1,900 mark. A sustained strength beyond has the potential to lift the Gold price to the $1,920 horizontal barrier, above which a bout of a short-covering move could push the XAU/USD towards the $1,950 region. This is closely followed by the multi-month peak, around the $1,960 area touched last week. A sustained strength beyond the latter should allow bulls to aim to conquer the $2,000 psychological mark for the first time since March 2022.

Key levels to watch