Gold Price Forecast: XAU/USD loses ground near $1,970 as US Dollar rebounds

• Gold price extends losses as the Greenback continues to move in an upward direction.
• Gold faces challenges due to the reduced risk premium from the lack of escalation in the Israel-Hamas conflict.
• Upgrading China’s GDP growth could lead to an increase in Gold prices.

Gold price continues to move on a downward trajectory due to the rebound in the US Dollar (USD). The price of Gold trades lower around $1,970 per troy ounce during the Asian session on Wednesday.

The price of gold also faces challenges, partly because traders have factored in a reduced risk premium from the Israel-Hamas conflict. The lack of escalation in the conflict has diminished safe-haven demand for Gold.

International Monetary Fund (IMF) has revised China's Gross Domestic Product (GDP) growth projections, anticipating a growth rate of 5.4% in 2023, up from the initial forecast of 5.0%, and 4.6% in 2024, surpassing the previous estimate of 4.2%. A positive shift in China's economic landscape could lead to an increase in Gold prices.

Moreover, the recent decline in US Treasury yields seems to be tied to an optimistic mood on Wall Street, which dampens the demand for safe-haven assets like Gold. Market participants are speculating on the possibility of the US Federal Reserve (Fed) holding off on interest rate hikes in future meetings. This sentiment is fueled by both the disappointing Non-Farm Payrolls data from last Friday and the dovish stance adopted by the Fed in November's meeting.

Member of the Federal Reserve Board of Governors, Lisa Cook mentioned on Monday that the current interest rate policy is considered sufficiently restrictive to maintain price stability.

However, the US Dollar (USD) strengthened after Minneapolis Fed President Neel Kashkari made a statement on Tuesday, cautioning against prematurely declaring the end of the Fed's rate hike cycle. Kashkari raised doubts about the adequacy of current policy in light of the robust economy, suggesting that a rise in inflation might warrant additional tightening.

Additionally, Chicago Fed President Austan Goolsbee recognized advancements in managing inflation and hinted that the discussion's focal point could transition to determining the duration for which interest rates should be maintained at their present level.

Investors are likely to keenly observe for additional insights into the potential trajectory of interest rates from the Fed Chairman Jerome Powell’s speech at a conference in Washington, DC on Wednesday, hosted by the Division of Research and Statistics.