Gold Price Forecast: XAU/USD climbs back closer to $1,930, moves away from four-week low

• Gold price regains positive traction and draws support from a combination of factors.
• A softer risk tone and a modest US Dollar downtick benefit the safe-haven XAU/USD.
• Bets for more rate hikes by the Federal Reserve might keep a lid on any further gains.

Gold price attracts some buying during the Asian session on Wednesday and recovers a part of the previous day's losses to the $1,923-$1,922 area, or a four-week low. The XAU/USD currently trades just below the $1,930 level, up nearly 0.20% for the day, though any meaningful upside still seems elusive.

A generally softer tone around the equity markets, along with a modest US Dollar (USD) downtick, turn out to be a key factor lending some support to the Gold price. Weaker Chinese trade data released on Tuesday revived fears about the worsening outlook for the world's second-largest economy. Adding to this, Moody’s downgraded the debt ratings for a slew of US banks and dampened investors' appetite for riskier assets. The anti-risk flow tends to benefit the safe-haven precious metal.

Meanwhile, the USD Index (DXY), which tracks the Greenback against a basket of currencies, remains depressed below a one-month top tested on Tuesday and further benefits the US Dollar-denominated Gold price. The overnight dovish remarks by Philadelphia Federal Reserve Bank President Patrick Harker, saying that they will probably start lowering the policy rate sometime next year, hold back the USD bulls from placing fresh bets, though the downside is more likely to remain limited.

Market participants now seem convinced that the Fed will stick to its hawkish stance in the wake of an extremely resilient US economy. The bets were lifted by the closely-watched US jobs report, which pointed to the continued tightness in the labour market and raised the odds of a soft landing. Adding to this, Fed Governor Michele Bowman on Monday kept the door for one more 25 bps lift-off in September or November wide open and should continue to act as a tailwind for the USD.

Traders might also prefer to move to the sidelines ahead of the release of the latest US consumer inflation figures on Thursday. The crucial US CPI report will play a key role in influencing market expectations about the Fed's future rate-hike path. This, in turn, will drive the USD demand and help determine the next leg of a directional move for the Gold price. Hence, it will be prudent to wait for strong follow-through buying to confirm that the XAU/USD has formed a near-term bottom.

Technical levels to watch