Bets for an imminent pause by Federal Reserve also lend support

This was seen as a sign that labor market conditions were loosening up as higher borrowing costs continue to dampen demand in the economy, which should allow the Fed to pause after hiking one last time in May. Moreover, the March Federal Open Market Committee (FOMC) meeting minutes released on Wednesday revealed that several policymakers considered pausing interest rate increases after the failure of two regional banks.

Furthermore, Atlanta Fed president, Raphael Bostic, told Reuters this Friday that the recent developments are consistent with one more hike. This acts as a headwind for the US Treasury bond yields, which, in turn, keeps the USD bulls on the defensive and further acts as a tailwind for the non-yielding Gold price. Apart from this, a generally weaker tone around the equity markets is seen driving some haven flows towards the precious metal.

Looming recession risks further benefit the safe-haven XAU/USD

The International Monetary Fund (IMF) earlier this week trimmed its 2023 global growth outlook, citing the impact of higher interest rates. This, along with worries that the post-COVID recovery in China is losing steam, fuels recession fears and tempers investors' appetite for riskier assets. This, in turn, lends some support to traditional safe-haven assets, including the XAU/USD, and supports prospects for a further near-term appreciating move.