Gold Price Forecast: XAU/USD edges higher amid weaker USD, risk-on mood seem to cap gains

• Gold attracts some dip-buying and climbs to $1,800 neighbourhood amid sustained USD selling.
• Diminishing odds for a larger Fed rate hike, sliding US bond yields continue to weigh on the USD.
• The risk-on impulse seems to be the only factor capping the upside for the safe-haven commodity.

Gold reverses an intraday dip to the $1,784-$1,783 region and climbs to a fresh daily high during the early North American session. Bulls, however, seem struggling to capitalize on the move and push the XAU/USD back above the $1,800 round-figure mark.

The US dollar struggles to attract any buyers and remains well within the striking distance of its lowest level since late June, which, in turn, offers some support to the dollar-denominated gold. The softer-than-expected US consumer inflation figures released on Wednesday forced investors to pare bets for a 75 bps Fed rate hike move at the September policy meeting. This, along with a fresh leg down in the US Treasury bond yields, further undermines the greenback and benefits the non-yielding yellow metal.

That said, the risk-on mood keeps a lid on any further gains for the safe-haven gold, at least for the time being. Signs that inflation might have peaked already continue to fuel speculations for a less aggressive policy tightening by the US central bank. The US Producer Price Index (PPI) released this Thursday reinforces market expectations and further boosts investors' confidence. This is evident from a strong performance around the equity markets, which seems to act as a headwind for the commodity.

Furthermore, the Fed is still expected to hike interest rates by at least 50 bps in September and might further contribute to capping the upside for gold. Hence, it would be prudent to wait for some follow-through buying beyond the $1,808 area - a five-week high touched on Wednesday - before positioning for any further appreciating move. Nevertheless, the intraday bounce favours bullish traders and suggests that any meaningful pullback could still be seen as a buying opportunity.

Technical levels to watch