Gold Price Forecast: XAU/USD recovers from multi-week low, Fed rate hike jitters cap gains

• Gold price edges higher on Thursday and draws support from a modest US Dollar weakness.
• Recession fears lend additional support to the XAU/USD, though the upside seems limited.
• Expectations for more rate hikes by Federal Reserve should act as a headwind for Gold price.

Gold price attracts some buying on Thursday and recovers a part of the previous day's losses to the $1,830 area, or its lowest level since January 6. The XAU/USD sticks to its gains through the early European session and is currently hovering near the top boundary of its daily range, around the $1,840 level.

Modest US Dollar weakness benefits Gold price amid looming recession risks

The US Dollar (USD) retreats from a six-week high touched on Wednesday amid a modest downtick in the US Treasury bond yields. This, in turn, is seen as a key factor driving some flows towards the US Dollar-denominated Gold price. Apart from this, fears of a global recession lend additional support to the safe-haven precious metal, though any meaningful upside still seems elusive.

Bets for additional rate hikes by Federal Reserve could cap XAU/USD

Investors now seem convinced that interest rates are going to remain higher for longer amid stubbornly high inflation. The bets were lifted by Tuesday's release of the Consumer Price Index (CPI) from the United States (US). In fact, the markets are currently pricing in at least a 25 bps lift-off at each of the next two Federal Open Market Committee (FOMC) meetings in March and in May.

Furthermore, several FOMC policymakers, including Fed Chair Jerome Powell, recently stressed the need for additional interest rate hikes to fully gain control of inflation. This should act as a tailwind for the US bond yields and lend support to the buck. Hence, it will be prudent to wait for a strong follow-through buying around the non-yielding Gold price before placing bullish bets.

Macro data from United States to provide some impetus to Gold price

Traders now look to the release of the US Producer Price Index (PPI), which should provide fresh cues about inflationary pressures. This, in turn, will influence expectations about the Fed's future rate-hiking campaign. Thursday's US economic docket also features the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claims, Building Permits and Housing Starts.

This US macro data, along with the US bond yields, could drive the USD demand. Apart from this, the broader risk sentiment should allow traders to grab short-term opportunities around the Gold price. Nevertheless, the fundamental backdrop seems tilted firmly in favour of the USD bulls and suggests that the path of least resistance for the XAU/USD is to the downside.

Gold price technical outlook

From a technical perspective, the overnight downfall validates a breakdown below the 50-day Simple Moving Average (SMA) and adds credence to the negative outlook. Hence, a subsequent fall towards the $1,818-$1,817 intermediate support, en route to the $1,800 round figure, looks like a distinct possibility.

On the flip side, the $1,852-$1,853 region could act as an immediate hurdle ahead of the 50-day SMA, currently around the $1,860 level. Any further move up is more likely to attract fresh sellers and remain capped near the $1,871-$1,872 region, or the weekly high, which should now act as a key pivotal point.

Key levels to watch