Gold Price Forecast: XAU/USD flits with daily high, around $1,640 level amid weaker USD

• Gold stages a goodish bounce from its lowest level since April 2020 touched earlier this Tuesday.
• A modest pullback in the US bond yields prompts USD profit-taking and underpins the XAU/USD.
• Aggressive Fed rate hike bets, the risk-on impulse might keep a lid on the safe-haven commodity.

Gold attracts some buyers near the $1,620 area and stages a goodish rebound from its lowest level since April 2020 touched earlier this Tuesday. The XAU/USD maintains its bid tone through the mid-European session and is currently placed around the $1,640 level, up over 1% for the day.

The US dollar pauses its recent blowout rally and eases from a fresh two-decade high touched on Monday amid some profit-taking on the back of a modest pullback in the US Treasury bond yields. This, in turn, is seen as a key factor offering support to the dollar-denominated gold. The USD bulls remain on the defensive following the release of the rather unimpressive US Durable Goods Orders data for August.

Despite a weaker USD, the XAU/USD lacks bullish conviction amid the prospects for aggressive policy tightening by global central banks, including the Federal Reserve. In fact, the US central bank last week signalled that it will hike interest rates at a faster pace at its upcoming meetings to tame surging inflation. This might continue to act as a tailwind for the US bond yields and the USD.

It is worth recalling that the yield on the rate-sensitive two-year US government bond rose to over a 15-year peak and the benchmark 10-year Treasury note to the highest level since April 2010 on Monday. This supports prospects for the emergence of some USD dip-buying. Apart from this, the risk-on impulse might further contribute to keeping a lid on any meaningful upside for the non-yielding gold.

Even from a technical perspective, Friday's breakdown below a one-week-old trading range support, around the $1,654 area, favours bearish traders. This, in turn, suggests that any subsequent move up might still be seen as a selling opportunity. Next on tap is the release of the Conference Board's Consumer Confidence Index, New Home Sales data and the Richmond Manufacturing Index from the US.

The data might do little to provide a fresh impetus. Nevertheless, the XAU/USD, for now, seems to have snapped a two-day losing streak and remains at the mercy of USD price dynamics. Apart from this, US bond yields and the broader market risk sentiment could allow traders to grab short-term opportunities around gold.

Technical levels to watch