Gold Price Forecast: XAUUSD struggles near YTD low as strong USD buying remains unabated

• Gold Price witnessed some selling on Monday amid relentless USD buying interest.
• Bets for more aggressive rate hikes by the Fed pushed the USD to a fresh 20-year high.
• Recession fears weighed on investors’ sentiment and helped limit losses for the XAUUSD.

Gold Price edged lower through the early North American session and dropped to the $1,734 area in the last hour, back closer to its lowest level since September 2021 touched on Friday. The downtick was exclusively sponsored by the emergence of aggressive US dollar buying, which tends to undermine the dollar-denominated commodity.

In fact, the USD Index surged to a new 20-year high and continued drawing support from expectations that the Fed would retain its faster policy tightening path to curb soaring inflation. The bets were reaffirmed by last week's FOMC meeting minutes, which emphasized the need to fight inflation even if it results in an economic slowdown. Policymakers indicated that another 50 or 75 bps rate hike is likely at the upcoming FOMC meeting in July. Hence, the market focus now shifts to the latest US consumer inflation figures, due for release on Wednesday.

In the meantime, the prospects for rapidly rising interest rates and tightening financial conditions continued to fuel worries about the global growth outlook. This, in turn, tempered investors' appetite for perceived riskier assets, which was evident from a generally weaker tone around the equity markets and offered some support to the safe-haven gold. The flight to safety triggered a fresh leg down in the US Treasury bond yields and was seen as another factor that helped limit deeper losses for the non-yielding yellow metal, at least for the time being.

The mixed fundamental backdrop warrants some caution for bearish traders and before positioning for any further near-term depreciating move. Even from a technical perspective, the recent range-bound price action witnessed over the past three trading sessions points to indecision among traders over the next leg of a directional move. Hence, sustained weakness below the $1,733 region is needed to confirm a fresh breakdown, which would make gold price vulnerable to testing the $1,700 mark in the near term.

Technical levels to watch