Gold Price Forecast: XAU/USD recovers above $4,100, hawkish Fed might cap gains

• Gold price rebounds to around $4,105 in Monday’s early Asian session. 

• Markets are bracing for a flood of delayed economic reports that could signal a slowing US economy. 

• Hawkish Fed comments might cap the upside for the Gold price. 

Gold price (XAU/USD) recovers some lost ground to near $4,105, snapping the two-day losing streak during the early European session on Friday. The precious metal edges higher on the softer US Dollar (USD).  Traders will take more cues from the Fedspeak later on Monday. The Fed’s John Williams, Philip Jefferson, Neel Kashkari and Christopher Waller are set to speak. 

Improved market sentiment after the federal government reopened undermined the safe-haven assets, such as the Gold price. The US government has reopened after US President Donald Trump signed a funding bill into law last week, ending the longest shutdown in US history, which lasted 43 days. Federal employees were directed to return to work on Thursday. 

However, investors continue to grapple with uncertainty over the release of delayed economic data following the record-long shutdown. Analysts believe that the resumption of US economic data will show job market weakness and a potential slowdown. This, in turn, could weigh on the Greenback and lift the USD-denominated commodity price. Non-yielding yellow metal tends to perform well during periods of economic uncertainty and in a low-interest-rate environment.

The upside for the yellow metal might be limited due to hawkish remarks from US Federal Reserve (Fed) officials, dimming hopes for a December interest rate cut. Kansas City Fed President Jeffery Schmid said on Friday that monetary policy should “lean against demand growth,” adding that current Fed policy is “modestly restrictive,” which he believes is appropriate. 

Financial markets are now pricing in a nearly 54% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, down from 62.9% probability that markets priced in earlier last week, according to the CME FedWatch Tool.