Gold Price Forecast: XAU/USD recovery lost momentum above $1,970, eyes on US GDP

• Gold price recovery lost momentum after climbing to the $1,982 mark.
• Additional rate hikes from the central banks might cap the upside in the gold price.
• Market participants are watching the development of a stimulus plan in China.
• Traders will focus on the second quarter’s US Gross Domestic Product (GDP).

Gold price (XAU/USD) loses its traction after rising towards $1,982 heading into the early European session. Precious metals trade on a positive note for the third successive day on Thursday. XAU/USD currently trades near $1,975, up 0.19% for the day.

As expected, the Federal Open Market Committee (FOMC) hiked its interest rate by 25 basis points (bps) to a target range of 5.25%–5.5%. The rate was last seen just before the housing market collapse in 2007 and marked the highest level in more than 22 years.

Fed Chairman Jerome Powell stated following the rate decision that inflation has moderated somewhat since the middle of last year but that the Fed’s 2% target “has a long way to go. Even so, Powell left room for the Fed to keep rates unchanged at its September meeting. He added that the Fed will consider the incoming data for additional rate hikes if needed. The hints that the Fed could be close to the end of its rate-hike cycles might cap the downside in precious metals. It’s worth noting that gold is sensitive to rising interest rates as they raise the opportunity cost of holding non-yielding bullion.

Nevertheless, the ECB is expected to raise interest rates by 25 basis points (bps) on Thursday. Market participants speculate that the ECB will raise borrowing costs in July and September to bring inflation back to target. However, concern about the economic slowdown in the Eurozone might convince the central bank to pause rate hikes. Investors will take cues from ECB President Christine Lagarde about further monetary policy. A hawkish stance from the ECB might be a headwind for the gold price.

On the other hand, China, the world’s largest gold consumer, signaled additional support for the real estate sector and a series of measures to stimulate domestic consumption amid a sluggish post-COVID recovery. This, in turn, supports further upside in the gold price. The development of an additional stimulus plan in China will be in the spotlight for gold traders. 

Moving on, market participants will focus on the first readings of the US Gross Domestic Product (GDP) for the second quarter (Q2), the core Personal Consumption Expenditure (PCE) Price Index MoM, Durable Goods Orders, and Initial Jobless Claims data later in the day. These data might influence the USD price dynamics and determine short-term trading opportunities around the gold price.

XAU/USD