Gold Price Forecast: XAU/USD retreats from over a one-week high, back below $1,715 level

• Gold witnessed an intraday turnaround from over a one-week high touched earlier this Thursday.
• Aggressive rate hikes by major central banks continue to act as a headwind for the commodity.
• Retreating US bond yields keep the USD bulls on the defensive, though fail to lend any support.

Gold struggles to capitalize on its intraday positive move to a one-and-half-week high and meets with a fresh supply near the $1,728 region on Thursday. The pullback extends through the early North American session and drags spot prices to a fresh daily low, closer to the $1,710 level in the last hour.

More aggressive rate hikes by major central banks to tame inflation turn out to be a key factor that continues to act as a headwind for the non-yielding gold. It is worth recalling that the Reserve Bank of Australia raised its benchmark rates by 50 bps on Tuesday, while the Bank of Canada maintained a more hawkish bias and delivered a 75 bps hike on Wednesday.

This was followed by a supersized 75 bps rate increase on Thursday by the European Central Bank, which expects to raise interest rates further to dampen demand. Furthermore, the US central bank is also anticipated to continue to tighten its monetary policy at a faster pace. That said, a modest US dollar weakness limits the downside for the dollar-denominated gold.

The USD extends the overnight retracement slide from a two-decade high and remains on the defensive for the second successive day amid a further pullback in the US Treasury bond yields. Apart from this, the prevalent cautious mood - amid growing worries about a deeper global economic downturn - could further offer some support to the safe-haven precious metal.

The prospects for a further policy tightening by major central banks, economic headwinds stemming from fresh COVID-19 lockdowns in China and protracted war in Ukraine have been fueling recession fears. This continues to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets and benefits traditional safe-haven assets.

The mixed fundamental backdrop warrants some caution before placing aggressive directional bets around gold. Even from a technical perspective, spot prices have been oscillating in a familiar range over the past week or so. Hence, a sustained move in either direction is needed to confirm the near-term trajectory for the commodity.

Technical levels to watch