Gold Price Forecast: XAU/USD climbs to $1,975 area, closer to weekly peak set on Wednesday

• Gold price trades with positive bias for the third straight day and hovers near the weekly high.
• Looming recession risks benefit the safe-haven metal ahead of the ECB and key US macro data.
• Bets for additional rate hikes by major central banks might act as a headwind for the XAU/USD.

Gold price gains some positive traction for the third successive day on Thursday and climbs to the $1,975 area during the Asian session, back closer to the weekly high touched the previous day. The XAU/USD might now look to build on this week's positive move from the vicinity of the $1,950 level and remains well within the striking distance of over a two-month high set last week.

The Federal Reserve (Fed) on Wednesday, as was expected, raised interest rates by 25 basis points (bps) to the 5.25%-5.50% range, or the highest level in 22 years, citing still-elevated inflation as the rationale. In the post-meeting press conference, Fed Chair Jerome Powell said that the economy still needs to slow and the labour market to weaken for inflation to credibly return to the 2% target. This leaves the door open for one more rate hike in September or November, which assists the US Dollar (USD) to stall its corrective decline from a two-week high touched on Tuesday and might turn out to be a key factor capping the Gold price.

Furthermore, expectations for additional rate hikes by the European Central Bank (ECB) and the Bank of England (BoE) further contribute to keeping a lid on the non-yielding yellow metal, for now. In fact, investors seem convinced that the ECB will increase borrowing costs in July and September. The BoE, meanwhile, is anticipated to hike interest rates by 25 bps in every meeting through November. The bets were lifted by the recent upside surprise to pay growth, though softer consumer inflation figures from the United Kingdom (UK) last week pushed back against expectations for a more aggressive policy tightening by the central bank.

The downside for the Gold price, however, remains cushioned in the wake of a general consensus that the Fed is getting closer to the end of its current interest rate-hiking cycle. Apart from this, worries about a global economic downturn, geopolitical risks and the worsening relations between the United States (US) and China - the world's two largest economies - should continue to lend support to the safe-haven precious metal. The aforementioned mixed fundamental backdrop, meanwhile, warrants some caution before placing aggressive bets around the XAU/USD and positioning for a firm near-term directional move.

Market participants now look forward to the ECB policy decision, which, along with important US macro data, should provide some meaningful impetus to the Gold price. Thursday's US economic docket features the release of the Advance GDP report for the second quarter, Durable Goods Orders, the usual Weekly Initial Jobless Claims and Pending Home Sales data. This might influence the USD price dynamics and produce short-term trading opportunities around the XAU/USD. The market focus will then shift to the release of the Fed's preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, due on Friday.

Key levels to watch