Gold Price Forecast: XAU/USD hangs near one-week low; risk-off mood limits downside

• Gold price surrenders its modest intraday gains and hangs near a one-week low set on Thursday.
• A more hawkish stance adopted by major central banks acts as a headwind for the commodity.
• The emergence of some US Dollar buying further contributes to capping gains for the XAU/USD.
• The prevalent risk-off environment lends support and helps limit the downside for Gold price.

Gold price struggles to capitalize on its modest intraday uptick and attracts fresh sellers near the $1,785 region on Friday. The XAU/USD slips below the $1,780 level during the first half of the European session and hovers around a one-week low touched on Thursday.

Hawkish central banks act as a headwind for Gold price

The prospects for further policy tightening by major central banks turn out to be a key factor acting as a headwind for the non-yielding Gold price. In fact, the Federal Reserve signalled on Wednesday that it will continue to raise rates to crush inflation. Moreover, policymakers see the terminal rate rising to 5.1%, up from the 4.6% level forecasted in September. The European Central Bank (ECB) also struck a hawkish tone on Thursday and indicated that more interest rate hikes are needed to tame inflation. The Bank of England, meanwhile, offered a similar message and said that more rate hikes were likely in its fight against stubbornly high inflation.

Modest USD uptick contributes to cap Gold price

Apart from this, the emergence of some US Dollar dip-buying, bolstered by a goodish pickup in the US Treasury bond yields, further contributes to capping the upside for the Dollar-denominated Gold price. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, is now looking to build on the previous day's solid rebound from its lowest level since mid-June. That said, the downside remains cushioned, at least for the time being, amid the prevalent risk-off environment, which tends to benefit the safe-haven XAU/USD.

Risk-off impulse could limit losses for Gold price

The market sentiment remains fragile amid concerns that rapidly rising borrowing costs could trigger a deeper global economic downturn. This is evident from a further steep decline in the equity markets, which might force investors to take refuge in traditional safe-haven assets and lend some support to Gold price. This makes it prudent to wait for strong follow-through selling before confirming that the XAU/USD has topped out and positioning for any meaningful corrective pullback in the near term.

Gold price technical outlook

From a technical perspective, the recent two-way price moves around the very important 200-day Simple Moving Average (SMA) might be categorized as a bullish consolidation phase. Moreover, oscillators on the daily chart are holding in the positive territory and support prospects for further gains. That said, repeated failures to find acceptance, or capitalize on the move beyond the %1,800 mark warrant some caution for aggressive traders.

Gold price key levels to watch