Gold Price Forecast: XAU/USD oscillates in a narrow range, remains below $1,800 mark

• Gold price lacks any firm directional bias on Monday and remains confined in a narrow range.
• A modest USD downtick lends some support, though a combination of factors caps the upside.
• The prospects for further tightening by major central banks act as a headwind for the metal.

Gold price struggles to capitalize on Friday's goodish rebound from over a one-week low and oscillates in a narrow band on the first day of a new week. The XAU/USD, meanwhile, manages to hold above the very important 200-day Simple Moving Average (SMA), albeit remains below the $1,800 mark through the early European session.

The US Dollar comes under some renewed selling pressure and turns out to be a key factor lending some support to the Dollar-denominated Gold price. The downside for the USD, however, is likely to remain limited amid a modest uptick in the US Treasury bond yields, bolstered by a more hawkish commentary by the Federal Reserve (Fed) last week.

In fact, the US central bank said that it will continue to raise rates to tame inflation and projected at least an additional 75 bps increase in borrowing costs by the end of 2023. This acts as a tailwind for the US bond yields, which, along with the prospects for further tightening by other major central banks, cap the non-yielding Gold price.

It is worth recalling that the European Central Bank (ECB) struck a hawkish tone last Thursday and indicated that more interest rate hikes are needed to combat stubbornly high inflation. The Bank of England (BoE) also offered a similar message and said that more rate hikes were likely in its fight against the persistent rise in consumer prices.

Apart from this, a stable performance around the equity markets is seen as another factor holding back traders from placing bullish bets around the safe-haven XAU/USD. That said, growing worries about a deeper global economic downturn should keep a lid on any optimism in the markets and continue to offer some support to Gold price, at least for now.

In the absence of any major market-moving economic releases, the mixed fundamental backdrop supports prospects for an extension of the subdued/range-bound price action. Traders might also prefer to wait on the sidelines ahead of the release of the Core PCE Price Index from the US - the Fed's preferred inflation gauge later this week.

Technical levels to watch