Gold Price Forecast: XAU/USD consolidates below $1,725, stronger USD acts as headwind

• Gold attracts some intraday selling at higher levels amid a modest USD strength.
• Aggressive Fed rate hike bets, elevated US bond yields underpin the greenback.
•  Recession fears, risk-off mood might offer support to the safe-haven XAU/USD.

Gold struggles to gain any meaningful traction on Thursday and seesaws between tepid gains/minor losses through the early North American session. The XAU/USD is currently placed in neutral territory, around the $1,715 region as traders await a fresh catalyst before positioning for the next leg of a directional move.

The US dollar edges higher for the second straight day and is looking to build on the overnight bounce from a two-week low, which, in turn, acts as a headwind for the dollar-denominated gold. The recent hawkish remarks by several Fed officials reinforced market expectations that the US central bank will continue to tighten its monetary policy at a faster pace to tame inflation. In fact, the markets have been pricing in another supersized 75 bps Fed rate hike move in November, which remains supportive of elevated US Treasury bond yields and continues to underpin the greenback.

Market players, meanwhile, remain concerned about the economic headwinds stemming from rapidly rising borrowing costs. Adding to this, the risk of a further escalation in the Russia-Ukraine conflict takes its toll on the global risk sentiment. This is evident from a generally weaker tone around the equity markets, which is seen offering some support to the safe-haven gold. The mixed fundamental backdrop is holding back traders from placing aggressive bets around the XAU/USD. Investors also prefer to move on the sidelines ahead of the closely-watched US monthly employment details.

The popularly known NFP report is due for release on Friday and will play a key role in influencing the near-term USD price dynamics. This, in turn, should provide some meaningful impetus to the non-yielding gold. In the meantime, the US bond yields and speeches by influential FOMC members will drive the USD demand. Apart from this, the broader market risk sentiment could provide some impetus to the yellow metal and allow traders to grab short-term opportunities.

Technical levels to watch