Gold Price Forecast: XAU/USD recovers further from YTD low, upside potential seems limited

• Gold price gains some follow-through traction on Monday and moves away from the YTD low.
• Recession fears, along with geopolitical tensions, lend some support to the safe-haven XAU/USD.
• Hawkish Federal Reserve expectations underpin the US Dollar and might cap gains for Gold price.

Gold price edges higher on the first day of a new week and looks to build on Friday's bounce from the $1,819-$1,818 area, or the YTD low. The XAU/USD sticks to its modest intraday gains through the early European session and is currently placed just above the $1,845 region, albeit seems to lack bullish conviction.

Reviving safe-haven demand lends support to Gold price

Against the backdrop of looming recession risks, geopolitical tensions turn out to be a key factor that offers some support to the safe-haven Gold price. In fact, North Korea launched two more ballistic missiles off its east coast on Monday after firing an intercontinental ballistic missile (ICBM) into the sea off Japan's west coast over the weekend. Adding to this, talks of Russia ramping up attacks in Ukraine drive some haven flows towards the XAU/USD.

Bets for more rate hikes by Federal Reserve cap Gold price

The upside for the Gold price, meanwhile, remains capped amid the prospects for further policy tightening by the Federal Reserve (Fed). In fact, the markets are pricing in at least a 25 basis points (bps) lift-off at the next two Federal Open Market Committee (FOMC) meetings in March and May. The bets were lifted by the United States (US) Consumer Price Index (CPI) and the Producer Price Index (PPI), which showed that inflation isn't coming down quite as fast as hoped.

Stronger US Dollar further acts as a headwind for Gold price

Furthermore, several FOMC policymakers, including Fed Chair Jerome Powell, recently stressed the need to keep raising rates gradually to fully gain control of inflation. This, in turn, keeps a lid on the non-yielding Gold price amid the underlying bullish sentiment surrounding the US Dollar (USD). Hence, it will be prudent to wait for strong follow-through buying before placing bullish bets around the US Dollar-denominated XAU/USD and positioning for any further gains.

Investors now eye FOMC minutes for fresh directional impetus

Traders might also prefer to move to the sidelines ahead of the FOMC monetary policy meeting minutes, due for release on Wednesday. Investors will look for fresh clues about the Fed's rate-hike path, which will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to Gold price. In the meantime, the XAU/USD is likely to oscillate in a range amid thin trading volumes on the back of the President's Day holiday in the US.

Gold price technical outlook

From a technical perspective, any subsequent move up is likely to confront stiff resistance near the 50-day Simple Moving Average (SMA) support breakpoint, currently around the $1,862 area. This is followed by the $1,872-$1,873 supply zone, above which Gold price could aim to test the $1,890 hurdle and reclaim the $1,900 round-figure mark.

On the flip side, the $1,835 horizontal zone now seems to protect the immediate downside for Gold price ahead of Friday’s swing low, around the $1,819-$1,818 region. Some follow-through selling could make the XAU/USD vulnerable to accelerate the slide towards the $1,800 mark en route to the 100-day SMA support, currently around the $1,785 zone.

Key levels to watch