Gold Price Forecast: XAU/USD bounces away from lows, but has no continuity

• Gold recovers part of its intraday losses amid the appearance of some selling around the dollar.
• The Fed’s aggressive rate hike bets lift US bond yields and should act as a tailwind for the dollar.
• The outlook for more aggressive central banks could also help cap XAU/USD.

Gold attracts some buying near the $1,640 level on Thursday and regains a lot of ground lost earlier. The XAU/USD It is once again close to the weekly highs reached the previous day and is trading around the $1,655 area during the early American session, although with a drop of more than 0.30% on the day.

The US dollar struggles to hold on to its intraday gains and falls to a new daily low in the last hour, which proves to be a key factor offering support to dollar-denominated gold. The dollar’s decline could be attributed solely to a nice rebound in sterling demand, although a combination of factors could help limit deeper losses.

Investors seem convinced that the Federal Reserve will continue to raise interest rates at a faster pace to combat persistent inflation. These bets were bolstered by recent hawkish comments from a number of FOMC officials. This, in turn, triggers a further rise in US Treasury yields and should act as a tailwind for the dollar.

Furthermore, the prospect of more aggressive policy tightening by other major central banks could also help limit the rise in unprofitable gold. Therefore, it is prudent to wait for strong follow-on buying before confirming that XAU/USD has formed a near-term bottom and positioning for any further appreciation moves.

That said, the prevailing risk-averse mood, amid growing concerns about a deeper global economic downturn and geopolitical risk, could lend support to the safe-haven precious metal. The mixed fundamental background warrants some caution for aggressive traders and further directional bets on gold.

Technical levels to watch