• Gold price struggles to gain any meaningful traction and oscillates in a range on Wednesday.
• The hawkish outlook by major central banks acts as a headwind for the non-yielding XAU/USD.
• Economic woes help limit the downside ahead of Fed Chair Powell’s congressional testimony.

Gold price oscillates in a narrow band through the Asian session on Wednesday and now seems to have found acceptance below a technically significant 100-day Simple Moving Average (SMA). The XAU/USD currently trades just above the $1,935 area and remains well within the striking distance of a three-month low touched last week.

Hawkish major central banks cap gains for Gold price

Concerns over rising interest rates turn out to be a key factor that continues to act as a headwind for the non-yielding Gold price. It is worth mentioning that 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 on Thursday.

Bets for more rate hikes by Federal Reserve also weigh on XAU/USD

Furthermore, the Federal Reserve (Fed) last week forecasted a higher peak interest rate and signalled that borrowing costs may still need to rise as much as 50 bps this year. The expectations were lifted by strong housing market data from the United States (US) on Tuesday, showing that Housing Starts surged to a 13-month high in May. Moreover, permits for future construction also climbed during the reported month, suggesting that the housing market may be turning a corner after taking the biggest hit from the Fed's fastest monetary policy tightening campaign since the 1980s.

Investors now look to Fed Chair Powell’s congressional testimony

The Fed's hawkish outlook continues to act as a tailwind for the US Dollar (USD), which is seen as another factor contributing to capping the upside for the Gold price. The USD, however, lacks bullish conviction on the back of rising speculations that the Fed is nearing the end of its year-long rate-hiking cycle. Traders also seem reluctant and prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's semi-annual congressional testimony, which will be looked for clues about the future rate-hike path. This will help determine the next leg of a directional move for the XAU/USD.

Worries about economic downturn help limit losses for Gold price

In the meantime, the prevalent cautious mood might continue to lend some support to the safe-haven Gold price and help limit the downside, at least for the time being. The market sentiment remains fragile on the back of growing concerns about a global economic downturn, particularly in China. This, to a larger extent, overshadows an interest rate cut by the People’s Bank of China (PBoC) on Tuesday and continues to dent investors’ appetite for riskier assets. This is evident from the lack of any meaningful buying in the equity markets and drives some haven flows