Gold price oscillates in a narrow trading band through the Asian session on Tuesday.
A hawkish outlook by major central banks continues to act as a headwind for the metal.
Rising US bond yields underpin the US Dollar and contribute to capping the XAU/USD.
Gold price struggles to capitalize on its modest intraday uptick and oscillates in a narrow trading band through the first half of the Asian session on Tuesday. The XAU/USD currently trades around the $1,950 level, nearly unchanged for the day, and remains well within a familiar trading range held over the past month or so.
Federal Reserve’s uncertain rate-hike path leads to range-bound price action
The uncertainty over the Federal Reserve's (Fed) rate-hike path is holding back traders from placing aggressive directional bets around the Gold price. It is worth recalling that the Fed signalled last week that borrowing costs may still need to rise by as much as 50 basis points (bps) by the end of this year. That said, the incoming softer macro data from the United States (US) raised questions over how much headroom the Fed has to keep raising rates. Hence, the focus will remain glued to Fed Chair Jerome Powell's two-day congressional testimony, which will be scrutinized for fresh clues about the US central bank's policy outlook and help determine the near-term trajectory for the XAU/USD.
Hawkish major central banks continue to weigh on Gold price
In the meantime, the markets have been pricing in the possibility of another 25 bps lift-off in July as inflation in the US is still trending well above the central bank’s 2% annual target. This, along with a more hawkish outlook by other major central banks, caps the upside for the non-yielding Gold price. In fact, the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) delivered a surprise 25 bps rate hike earlier this month. Moreover, the European Central Bank (ECB) last week lifted rates to the highest level in 22 years and projected further tightening to bring down inflation. The Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike interest rates by 25 bps later this week.
Modest US Dollar uptick contributes to capping the XAU/USD
Apart from this, a modest US Dollar (USD) uptick, bolstered by a goodish pickup in the US Treasury bond yields, suggests that the path of least resistance for Gold price is to the downside. That said, worries about a global economic downturn continue to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets and could lend some support to the safe-haven XAU/USD. This, in turn, makes it prudent to wait for strong follow-through selling before traders start positioning for the resumption of the recent sharp retracement slide from the all-time high, around the $2,075-$2,080 region touched in May.
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