Gold Price Forecast: XAU/USD holds gains near $3,950 amid central bank purchases

• Gold prices find support as sustained central bank buying and renewed ETF inflows tighten the overall supply of the metal.
• The non-yielding gold extended its losses after Fed Chair Jerome Powell remarked that another rate cut in December is uncertain.
• Gold weakens as the Fed signaled to continue reducing QE, shifting mortgage-backed holdings into long-term Treasuries.

Gold price (XAU/USD) halts its four-day losing streak, trading around $3,950 per troy ounce during the Asian hours on Thursday. Gold prices gain ground as continued central bank purchases and renewed ETF inflows have tightened the supply of metal in both official and exchange channels.

However, the non-yielding Gold faced challenges after Federal Reserve Chair Jerome Powell stated at the post-meeting press conference that another rate cut in December is far from certain, emphasizing that the path forward remains uncertain. These cautious remarks pushed the yield on the 10-year Treasury above 4%, increasing the opportunity cost of holding non-yielding bullion. The Fed delivered a widely anticipated 25 basis point interest rate cut on Wednesday.

Fed Chair Powell added that the available data indicate little change in the outlook for employment and inflation since the September meeting. He noted that the government shutdown will weigh on economic activity while it continues, but should reverse once it ends.

Moreover, the Fed acknowledged it would continue to ease back on Quantitative Easing (QE) practices, with the process of drawing down the Fed's mortgage-backed asset balance sheet into long-term Treasuries by December 1. Gold, which thrives in easy-money environments, faced downward pressure as investors expect higher yields and a stronger US Dollar (USD).

The precious metals like Gold face challenges due to improved market sentiment, fueled by optimism over the potential for a trade deal between the United States (US) and China. US President Donald Trump and Chinese President Xi Jinping are set to meet later today in South Korea.