Gold Price Forecast: XAU/USD holds modest gains around the $1,910 level

• The gold price regains ground on Thursday, breaking a three-day losing streak.
• Recession fears, rising expectations for lower Fed rate hikes and a weakening USD offer support.
• The fundamental undercurrent favors the bulls and supports the prospect of further gains.

The price of gold (XAU/USD) attracts some buyers near the $1,900 level on Thursday and stops a three-day downtrend from its highest level since April 25. The intraday rise pushes XAU/USD to a new daily high, around the $1,916-1,917 zone, during the first half of the European session and is due to a combination of factors.

Recession fear drives gold price a safe haven

The current environment of risk aversion, reflected in the fall of the stock markets, benefits gold. Weaker-than-expected US economic data released on Wednesday fueled the concern about a general slowdown in the country. Furthermore, concern about economic difficulties stemming from the COVID-19 outbreak in Chinathe worst to date, stokes recession fears and weighs on investor appetite for riskier assets.

Expectations of lower rate hikes by the Federal Reserve also benefit the price of gold

The global flight to the safe haven, coupled with increasingly steadfast expectations of a less aggressive tightening of monetary policy by the Federal Reserve (Fed), continue to put downward pressure on US Treasury yields. Indeed, the yield on the rate-sensitive two-year US government bond falls to its lowest level since October, amid rising expectations for a 25 basis point Fed rate hike in February . This, in turn, keeps dollar bulls on the defensive and benefits the gold price, which offers no yields.

Hardline comments from several Fed officials could limit gains

In fact, the DXY dollar index, which measures the evolution of the greenback against a basket of currencies, is near multi-month lows, in a context of growing acceptance that the US central bank will soften its hawkish stance. That said, several Fed officials indicated on Wednesday that they will continue to raise rates, despite inflation showing signs of moderating and economic activity slowing. This helps limit losses for the dollar and acts as a headwind for the US dollar-denominated gold price.

Dips could be seen as a buying opportunity

However, the fundamental background remains strongly in favor of the bulls and supports the prospects for further rises in the price of gold. Therefore, any corrective pullback could be seen as a buying opportunity and is likely to remain limited. Traders will now focus on the US economic calendar, which will feature the Philadelphia Fed Manufacturing Index, the usual weekly initial jobless claims and housing market data. These data, along with Fed statements and US bond yields, should boost XAU/USD.

Gold Price Technical Outlook

From a technical point of view, any further move higher could continue to be met with resistance near the region of $1,927-$1,929before climbing the next relevant obstacle near the drop zone. $1,942. Bulls will see continuation buying as a new trigger that will set the stage for an extension of the recent uptrend of the past two months. On the other hand, it is likely that the area of $1,900-1,895 defend the immediate fall before the zone of $1,882-1,880. A convincing break below this latter zone could nullify the positive outlook and shift the short-term bias in favor of the bears.

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