Gold Price Forecast: XAU/USD approaches $1,900 on stronger US Dollar, hawkish central banks
- Gold price drifts lower for the fourth straight day and drops to over a three-month low.
- The Federal Reserve’s hawkish outlook lifts the US Dollar and weighs on the XAU/USD.
- Looming recession risks could help limit any further downside for the safe-haven metal.
Gold price attracts fresh sellers following an intraday uptick to the $1,912-$1,913 region and drifts into negative territory for the fourth successive day on Thursday. The XAU/USD remains on the defensive heading into the European session and is currently placed near its lowest level since mid-March, just above the $1,900 round-figure mark.
The US Dollar (USD) builds to Wednesday's strong move up and climbs to a fresh two-week peak, which, in turn, is seen as a key factor undermining the Gold price. Federal Reserve (Fed) Chair Jerome Powell's, Speaking at a European Central Bank (ECB) conference on Wednesday, reiterated that two rate increases are likely this year and said that he does not see inflation coming down to the Fed's 2% target until 2025. This reaffirms market bets for a 25 bps lift-off at the next FOMC policy meeting on July 25-26, pushing the US Treasury bond yields higher and benefitting the Greenback.
Apart from this, a more hawkish outlook by other major central bank contributes to driving flows away from the non-yielding Gold price. In fact, the European Central Bank (ECB) President Christine Lagarde said that inflation in the Eurozone had entered a new phase that could linger for some time. Lagarde added that it is unlikely that in the near future the central bank will be able to state with full confidence that the peak rates have been reached. Furthermore, the Bank of England (BoE) Governor Andrew Bailey hinted that rates could remain at peak levels for longer than traders currently expect.
The aforementioned fundamental backdrop seems tilted firmly in favour of bearish traders and supports prospects for a further near-term depreciating move for Gold price. That said, the worsening global economic outlook, along with concerns about deteriorating US-China relations, could lend some support to the safe-haven XAU/USD, for the time being. Traders might also refrain from placing aggressive bets and move to the sidelines ahead of Friday's key releases - the official Chinese PMI prints for June and the US Core PCE Price Index - the Fed's preferred inflation gauge.
Technical levels to watch