Gold Price Forecast: XAU/USD recovers further from multi-month low, back above $1,960

• Gold price gains positive traction for the second straight day, though lacks bullish conviction.
• An intraday pickup in the US bond yields revives the USD demand and could act as a headwind.
• Hawkish outlook by major central banks further contribute to capping gains for the XAU/USD.

Gold price builds on the overnight goodish recovery from the $1,925-$1,924 area, or a nearly three-month low and attracts some follow-through buying for the second successive day on Friday. The XAU/USD trades with a mild positive bias through the early part of the European session and is currently placed just above the $1,960 level, up over 0.20% for the day.

The uncertainty over the Federal Reserve’s (Fed) rate-hike path is seen as a key factor lending some support to the non-yielding Gold price, though any meaningful appreciating move still seems elusive. Thursday's rather unimpressive macro data from the United States (US) raised questions over how much headroom the Fed has to keep raising rates and fueled speculations that the end of the current policy tightening cycle is nearing.

The Fed, however, has signalled earlier this week that borrowing costs may still need to rise by as much as 50 bps by the end of this year. This, along with a modest uptick in the US Treasury bond yields, assists the US Dollar (USD) to stage a modest recovery from over a one-month low touched earlier this Friday. A modest USD strength might hold back traders from placing bullish bets around the US Dollar-denominated Gold price.

Furthermore, a more hawkish outlook by other major central banks might further contribute to capping the upside for the yellow metal. It is worth recalling that the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) delivered a surprise 25 basis point (bps) rate hike last week. The European Central Bank (ECB) also lifted rates by 25 bps, to the highest level in 22 years, and indicated further tightening to bring down inflation.

Moreover, the Bank of England (BoE) is expected to be far more aggressive in policy tightening to contain stubbornly high inflation and hike interest rates by 25 bps on June 22. Apart from this, a generally positive tone around the equity markets makes it prudent to wait for strong follow-through buying before confirming that the Gold price has formed a near-term bottom and positioning for any further gains.

Technical levels to watch