Gold Price Forecast: XAU/USD hits fresh two-month peak, seems poised to appreciate further

• Gold price catches fresh bids on Thursday and touches a two-month high during the Asian session.
• Expectations of a less hawkish Federal Reserve attract some selling around the USD and lend support.
• Economic woes, US-China tensions and geopolitical risk also benefit the safe-haven precious metal.

Gold price regains positive traction following the previous day's brief pause and touches a fresh two-month high during the Asian session on Thursday. The XAU/USD currently trades around the $1,984-$1,985 region and seems poised to prolong its recent steady upward trajectory witnessed over the past three weeks or so.

Modest US Dollar weakness underpins Gold price

The US Dollar (USD) struggles to capitalize on its recent recovery from the lowest level since April 2022 and retreats further from a one-week high touched on Wednesday. This, in turn, is seen lending some support to the US Dollar-denominated Gold price. The markets started pricing out the possibility of any further interest rate hikes by the Federal Reserve (Fed), following the expected 25 basis points (bps) lift-off in July, in the wake of a further moderation in inflationary pressures. Investors now seem convinced that the Fed is nearing the end of its current policy tightening, which had been a key factor behind a sharp fall in the US Treasury bond yields and continues to act as a headwind for the Greenback.

Reviving safe-haven demand further benefits XAU/USD

Apart from this, concerns over a global economic slowdown, the worsening US-China ties and geopolitical tensions lend additional support to the safe-haven Gold price. China's ambassador to Washington said on Wednesday that China does not want a trade or tech war but will respond if the US imposes more curbs on imports of equipment to make advanced chips. Adding to this, Russia's defence ministry declared that any ships heading to Ukraine's Black Sea ports would be viewed as potential carriers of military cargo and party to the conflict from Thursday. This, in turn, keeps a lid on the recent optimistic move in the equity markets and drives some haven flows towards the precious metal.

Fundamental backdrop seems tilted in favour of bullish traders

Apart from this, expectations that the European Central Bank (ECB) could signal a win against inflation and pause its rate-hiking cycle further seem to benefit the non-yielding Gold price. In fact, a slew of ECB Governing Council members this week reinforced the view that inflation may drop more quickly than forecasted and raised uncertainty over additional rate hikes beyond the July meeting. Moreover, inflation in Canada dropped to within the Bank of Canada's (BoC) control range for the first time since March 2021. ​This, in turn, suggests that the path of least resistance for the XAU/USD remains to the upside, though bulls might wait for some follow-through buying beyond the weekly high before placing fresh bets.

Gold price technical outlook

From a technical perspective, the overnight bounce from the $1,970 horizontal resistance breakout and the subsequent move beyond the $1,984-$1,985 region will validate the positive outlook. Given that oscillators on the daily chart are holding in the bullish territory, the Gold price seems poised to aim back to reclaim the $2,000 psychological mark. The upward trajectory could get extended further towards testing the next relevant hurdle near the $2,010-$2,012 supply zone.

On the flip side, the $1,970 area now seems to have emerged as immediate support ahead of the 100-day Simple Moving Average (SMA), currently around the $1,959 region. This is followed by the weekly swing low, around the $1,946-$1,945 zone, below which the Gold price could accelerate the fall towards the $1,934 horizontal support. Any subsequent fall, however, is more likely to get bought into and remain limited near the $1,926-$1,925 region.

Key levels to watch