Gold Price Forecast: XAU/USD surrenders intraday gains to weekly high, back below $1,665 level

• Gold struggles to preserve its intraday gains to a fresh weekly high touched this Friday.
• The prospects for aggressive policy tightening by the Fed continue to act as a headwind.
• The emergence of fresh USD buying exerts additional downward pressure on the metal.

Gold surrenders a major part of its intraday gains to a fresh weekly high touched earlier this Friday and retreats below the $1,665 level during the early North American session.

Despite growing recession fears and geopolitical risk, the safe-haven XAU/USD has been struggling to gain any meaningful traction amid the Federal Reserve’s commitment to getting inflation under control. Investors seem convinced that the US central bank will stick to its aggressive rate hiking cycle and have been pricing in the possibility of another supersized 75 bps rate hike in November. The bets were reaffirmed by Friday's release of the US Personal Consumption Expenditures (PCE) data, which continues to act as a headwind for the non-yielding gold.

Apart from this, resurgent US dollar demand turns out to be another factor exerting additional downward pressure on the dollar-denominated commodity. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, stages a solid recovery from the weekly low and for now, seems to have stalled this week's sharp pullback from a two-decade high. That said, the spill-over effect of the Bank of England's move to calm the markets drags the benchmark 10-year US Treasury note further away from a 12-year high set on Wednesday.

This, in turn, is seen holding back the USD bulls from placing aggressive bets. Apart from this, the prevalent risk-off environment offers some support to gold and should help limit the downside, at least for the time being. Nevertheless, the precious metal remains on track to register the sixth successive month of losses and the biggest quarterly fall since early 2021.

Technical levels to watch