Gold price remains confined in a familiar range, just above $1,700 mark

• Gold price struggled to gain any meaningful traction and remained confined in a range.
• The ongoing USD profit-taking slide continued lending some support to the commodity.
• Hawkish major central banks, the risk-on impulse acted as a headwind and capped gains.

Gold price attracted some dip-buying near the $1,705 region on Tuesday, though seemed to struggle to capitalize on the modest intraday gains. The XAUUSD, so far, has struggled to gain any meaningful traction and remained confined in a familiar trading range, just above the $1,700 round-figure mark.

Gold price drew support from sustained USD selling

The US dollar prolonged its retracement slide from a two-decade high touched last week, which, in turn, was seen as a key factor that offered some support to the dollar-denominated gold. In fact, the USD Index dropped to its lowest level since July 6 amid receding bets for a massive 100 bps rate hike move by the Federal Reserve in July. Several FOMC members signalled recently that they will likely stick to a 75 bps rate increase at the upcoming policy meeting on July 26-27.

US housing market data did little to impress USD bulls

The mixed US housing market data, meanwhile, did little to impress the USD bulls or provide any meaningful impetus to the gold price. The US Census Bureau reported that Housing Starts declined by 2% to a seasonally adjusted annual rate of 1,685,000, while Building Permits fell by 0.6% in the same period following the 7% contraction reported in May.

Aggressive tightening plans by major central banks acted as a headwind

That said, the prospects for a more aggressive move by major central banks continued acting as a headwind for the non-yielding yellow metal. The Fed is still expected to deliver a larger rate hike later this year to curb soaring inflation, which accelerated to a four-decade high in June. Adding to this, the European Central Bank (ECB) reportedly will discuss whether to raise interest rates by 25 bps or 50 bps to tame inflation at its upcoming policy meeting on Thursday.

Moreover, the minutes from the Reserve Bank of Australia policy meeting released earlier this Tuesday indicated that further increases in interest rate will be needed to return inflation to the target over time. This comes a day after Bank of England policymaker Michael Saunders said that the current tightening cycle may still have some way to go and the benchmark rate could reach 2% or higher next year.

Inflation fears

Risk-on impulse contributed to cap XAUUSD

This, along with a positive tone around the equity markets, further contributed to capping the upside for the safe-haven gold. Results from a number of major US banks generally have been solid. Apart from this, the recent decline in crude oil prices led to a modest rebound in investors' appetite for riskier assets.

Gold price technical outlook

Gold price, so far, has struggled to register any meaningful recovery from a nearly one-year low touched last week, suggesting that the near-term risks remain skewed to the downside. Hence, any attempted recovery beyond the $1,725-$1,726 immediate resistance might still be seen as a selling opportunity. This, in turn, should cap the XAUUSD near the $1,734-$1,735 horizontal resistance. Some follow-through buying might trigger a bout of short-covering and lift the commodity towards the $1,749-$1,752 supply zone.

On the flip side, last week's swing low, around the $1,698-$1,697 area, might continue to act as immediate support. A convincing break below would make the XAUUSD vulnerable to testing September 2021 low, around the $1,787-$1,786 region. Gold price could extend the downward trajectory towards 2021 yearly low, near the $1,677-$1,676 area.

Gold price: Bearish risks still intact