Gold Price Forecast XAUUSD remains confined in a narrow range below the $1,950 level

  • Gold price oscillates in a narrow range below $1,950, gaining 0.2% as the market turns cautious.
  • Fitch downgraded the US government’s credit rating from AAA to AA+, fueling concern about the US debt ceiling crisis.
  • The escalating tensions between the US-China might exert some pressure on the US Dollar.
  • Market participants await the US ADP Employment Change, the US-Sino relationship.

The gold price consolidates in a narrow range between $1,945 and $1,952 during the Asian session on Wednesday. XAU/USD recovers some of the previous day’s drop to the $1,941 level. 

Market sentiment remains sour as Fitch downgraded the US Long-Term Foreign-Currency Issuer Default Rating from AAA to AA+. The leading rating company cites an expected fiscal deterioration over the next three years and a high general government debt burden as the primary reasons for this drastic action.

US Treasury Secretary Janet Yellen expressed her strong disagreement with Fitch’s decision to downgrade the US government’s credit rating, calling it “arbitrary and based on outdated data”, according to Reuters. This headline fuels concern about the US debt ceiling crisis and might cap the upside in the Greenback. This, in turn, might benefit the price of gold, a traditional safe-haven asset. 

Furthermore, the escalating tensions between the US-China might exert some pressure on the US Dollar. Chinese authorities announced on Monday restrictions on the export of certain drones and drone-related equipment to the United States, citing “national security and interests.” Notably, the United States is China’s largest export market for drones. Additionally, US President Joe Biden plans to sign an executive order curbing US technology investments in China by mid-August.

On the other hand, the odds of additional rate hikes by the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE) may limit the US Dollar’s upside and act as a tailwind for the gold price. It’s worth noting that gold is sensitive to rising interest rates as they raise the opportunity cost of holding non-yielding bullion.

Market participants await the US ADP Employment Change due later in the American session. Also, the US weekly Jobless Claims and Unit Labour Cost will be released later this week. The highlight of the week will be the US Nonfarm Payrolls (NFP). The US economy is expected to have created 180,000 jobs. In the meantime, gold traders will closely monitor the headlines surrounding the US-China relationship for a clear direction in the gold price. 

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