Gold Price Forecast: XAU/USD retreats from one-month high, still well bid above $1,775 level

• Gold scales higher through the early North American session and refreshes one-month high.
• Geopolitical tensions, recession fears, softer US bond yields, weaker USD offer some support.
• Signs of stability in the financial markets act as a headwind ahead of the NFP report on Friday.

Gold eased a bit from a fresh one-month high touched during the early North American session and sliped back below the $1,780 level in the last hour. The XAU/USD, however, maintains its positive tone for the second straight day and is trading with gains of nearly 0.70% for the day.

Investors remain worried about a global economic downturn, which along with China's heightened military threats, continue to act as a tailwind for the safe-haven gold. China holds its largest-ever military exercises around Taiwan in retaliation to US House Speaker Nancy Pelosi's visit to the island. In the latest development, China on Thursday said that it conducted “precision missile strikes” in the Taiwan Strait as part of military exercises. The five missiles fired by China landed within Japan's exclusive economic zone and raises tensions in the region.

Apart from this, a modest US dollar weakness turns out to be another factor further underpinning the dollar-denominated gold. Despite more hawkish remarks by several Fed officials this week, investors have been pushing back against the idea of a larger rate hike at the September FOMC meeting. This is evident from a softer tone around the equity markets, which keeps the USD bulls on the defensive and lends some support to the non-yielding yellow metal. That said, signs of stability in the equity markets capped any further for the commodity, at least for the time being.

Investors also seem reluctant to place aggressive bets and prefer to wait for a fresh catalyst from the closely-watched US monthly jobs data. The popularly known NFP is scheduled for release on Friday and will play a key role in influencing the near-term USD price dynamics. Apart from this, geopolitics, along with the broader market risk sentiment, would assist traders to determine the next leg of a directional move for gold.

Technical levels to watch