GOLD PRICE FORECAST: XAU/USD RETREATS FROM NINE-MONTH PEAK AMID MODEST US DOLLAR RECOVERY

Gold price corrects from a fresh multi-month top touched earlier this Monday.

A goodish intraday US Dollar recovery drives flow away from the XAU/USD.

The downside remains cushioned amid bets for smaller rate hikes by the Fed.

Gold price retreats from a nearly nine-month peak, around the $1,929 area touched earlier this Monday and remains depressed through the first half of the European session. The XAU/USD drops to a fresh daily low, around the $1,910 region in the last hour, though any subsequent slide could be seen as a buying opportunity and remain limited.

Intraday US Dollar recovery undermines Gold price

The US Dollar (USD) stalls its recent downtrend and stages a solid intraday recovery from a seven-month low. This, in turn, is seen as a key factor weighing on the US Dollar-denominated Gold price. That said, growing acceptance that the Federal Reserve (Fed) will soften its hawkish stance, amid signs of easing inflationary pressures, could cap any meaningful upside for the Greenback.

Smaller rate hikes by Federal Reserve should cap USD

In fact, the latest inflation figures released from the United States (US) showed that consumer prices fell in December for the first time in more than two and half years. Moreover, several Fed officials backed the case for smaller rate hikes and reaffirmed bets for a 25 lift-off in February. This, in turn, might keep the US Treasury bond yields depressed and act as a headwind for the USD.

Downside for Gold price seems limited

Furthermore, speculations that the US central bank may be nearing the end of its current rate-hiking cycle could lend some support to the non-yielding Gold price. Apart from this, a softer risk tone - as depicted by a weaker trading sentiment around the equity markets - should hold back traders from placing aggressive bearish bets around the safe-haven XAU/USD and help limit the downside.