Gold Price Forecast: XAU/USD steadies around $1,700 mark, not out of the woods yet

• Gold remains depressed for the third successive day, though the downside seems cushioned.
• Aggressive Fed rate hike bets lift the USD to a fresh two-decade high and act as a headwind.
• Retreating US bond yields seem to cap gains for the USD and lend support to the XAU/USD.

Gold struggles to capitalize on its modest intraday bounce and attracts fresh selling near the $1,707 region on Wednesday. The XAU/USD remains on the defensive through the early North American session and is currently trading around the $1,700 round-figure mark.

The relentless US dollar buying remains unabated for the third successive day, which turns out to be a key factor exerting downward pressure on the dollar-denominated gold. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a fresh two-decade high and remains well supported by hawkish Fed expectations.

Tuesday's upbeat US ISM Services PMI reaffirmed market bets that the US central bank will continue to hike interest rates more aggressively to tame inflation. The Fed is widely expected to deliver a supersized 75 bps rate hike at the end of a two-day policy meeting on September 21, which, in turn, continues to act as a tailwind for the greenback.

Apart from this, a recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - further undermines the safe-haven gold. That said, a modest pullback in the US Treasury bond yields is holding back the USD bulls from placing fresh bets and lending some support to the non-yielding metal, for the time being.

There isn't any major market-moving economic data due for release from the US on Wednesday, leaving the USD bulls at the mercy of the US bond yields. That said, speeches by Fed officials might influence the USD price dynamics and provide some impetus to gold. Traders will further take cues from the broader risk sentiment to grab short-term opportunities.

Nevertheless, the fundamental backdrop remains tilted in favour of bearish traders. This, in turn, suggests that any attempted recovery move could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Gold still seems vulnerable to retesting the $1,689-$1,688 intermediate support before eventually dropping to the YTD low, around the $1,680 area.

Technical levels to watch