• Gold price ticks higher on Tuesday and is supported by the prevalent US Dollar selling bias.
• Bets that the Federal Reserve's policy tightening cycle is nearing the end weigh on the USD.
• Expectations for a 25 bps lift-off at the July FOMC meeting act as a headwind for the metal.

Gold price edges higher during the Asian session on Tuesday, albeit lacks bullish conviction and remains well below a key hurdle near the $1,935 area tested last week. The XAU/USD currently trades just above the $1,925 level, up less than 0.10% for the day, as traders keenly await the release of the latest consumer inflation figures from the United States (USD), due on Wednesday, before placing fresh directional bets.

Weaker US Dollar lends support to Gold price

The crucial US Consumer Price Index (CPI) will play a key role in influencing the Federal Reserve's (Fed) near-term policy outlook, which, in turn, will drive the US Dollar (USD) demand and provide some meaningful impetus to the Gold price. In the meantime, speculations that the US central bank is nearing the end of its policy tightening drag the USD lower for the fourth straight day, to its lowest level since May 11 and act as a tailwind for the US Dollar-denominated metal. The US monthly employment details released on Friday showed that the economy added the fewest jobs in 2-1/2 years, signalling that the labor market is cooling. Furthermore, the New York Fes's monthly survey revealed on Monday that the one-year consumer inflation expectation dropped to the lowest level since April 2021, to 3.8% in June from 4.1% in the previous month. This could allow the Fed to soften its hawkish stance and continues to weigh on the Greenback.

Bets for a 25 bps Fed rate hike in July cap gains for XAU/USD

Apart from this, worries about a global economic downturn lend additional support to the safe-haven XAU/USD, though the intraday uptick lacks bullish conviction. The overnight hawkish comments by several Fed officials reaffirm market bets for a 25 basis points (bps) lift-off at the upcoming Federal Open Market Committee (FOMC) policy meeting on July 25-26. This, in turn, is seen as a key factor acting as a headwind for the non-yielding Gold price. In fact, San Francisco Fed President Mary Daly said during an event at the Brookings Institution that the risks of doing too little are still greater than those of overdoing it on rate hikes. Adding to this, Cleveland Fed President Loretta Mester reiterated that the US central bank will need to tighten the monetary policy further to lower inflation. This, in turn, makes it prudent to wait for strong follow-through buying before positioning for any meaningful appreciating move for the Gold price