Gold Price Forecast: XAU/USD refreshes daily top near $2,020 on weaker US Dollar, risk-off

• Gold price attracts fresh buying on Monday and snaps a three-day losing streak.
• A modest US Dollar weakness is seen as a key factor that benefits the XAU/USD.
• A combination of factors warrants caution before placing aggressive bullish bets.

Gold price regains some positive traction on the first day of a new week and sticks to its modest intraday gains through the early North American session. The XAU/USD currently trades around the $2,020 region, up nearly 0.30% for the day, and for now, seems to have snapped a three-day losing streak.

Modest US Dollar weakness underpins Gold price

The US Dollar (USD) pulls back from a five-week high touched this Monday as investors remained wary of the US debt ceiling standoff. This, in turn, is seen as a key factor lending support to the US Dollar-denominated Gold price. It is worth mentioning that US President Joe Biden said he expects to meet with congressional leaders on Tuesday for talks on a plan to raise the debt limit and avoid a catastrophic default. This, in turn, prompts the USD bulls to take some profits off the table following the strong move-up witnessed over the past two trading days.

Looming recession risks further benefit the XAU/USD

Apart from this, worries of a global economic slowdown further benefits the safe-haven Gold price and remain supportive of the move up. The fears were fueled by the preliminary reading from the University of Michigan released on Friday, which showed that consumer sentiment in the United States (US) slumped to a six-month low in May. Additional details of the Michigan survey revealed that consumer inflation over the next five years is expected to climb at an annual rate of 3.2%  - the highest since 2011. This might force the Federal Reserve (Fed) to keep rates higher for longer.

Hawkish Federal Reserve expectations could cap gains

Fresh speculations that the US central bank will stick to its hawkish stance trigger a fresh leg up in the US Treasury bond yields, which should act as a tailwind for the USD and keep a lid on any further gains for the non-yielding Gold price. The aforementioned mixed fundamental backdrop, however, warrants some caution for aggressive bullish traders and before positioning for any further intraday appreciating move. Investors now look forward to speeches by influential Fed officials, which, along with the broader risk sentiment, should provide some impetus to the XAU/USD.

Gold price technical outlook

From a technical perspective, any subsequent move up is more likely to confront stiff resistance near the $2,035-$2,040 region. Some follow-through should allow Gold to climb back towards the all-time high, around the $2,078-$2,079 region touched earlier this month. The momentum could get extended further and allow bulls to conquer the $2,100 round-figure mark.

On the flip side, the $2,000 psychological mark now seems to have emerged as immediate strong support, which if broken might prompt some technical selling. The Gold price might then turn vulnerable to accelerate the fall towards the $1,980 zone en route to the $1,970 strong horizontal support. Some follow-through selling will negate any near-term positive outlook and shift the bias in favour of bearish traders.

Key levels to watch