Gold price regains some positive traction on Wednesday and builds on its steady intraday ascent through the early European session. The XAU/USD retakes the $2,000 psychological mark in the last hour and moves well within the striking distance of the weekly high touched the previous day.

Softer US Dollar lends some support to Gold price

The US Dollar (USD) struggles to capitalize on the overnight bounce from a nearly two-week low and remains on the defensive for the second successive day, which, in turn, is seen lending support to the Gold price. Concerns about banking contagion risks in the United States (US) resurfaced after the First Republic Bank reported more than $100 billion in customer withdrawals during the first quarter. This, along with the debt ceiling standoff and fears that the US economy is heading towards recession, fuel speculations about an imminent rate cut by the Federal Reserve (Fed) later this year and continue to weigh on the buck.

Bets for more rate hikes by major central banks could cap gains

The US central bank, however, is still expected to hike interest rates by 25 basis points (bps) at the next Federal Open Market Committee (FOMC) policy meeting in May. This remains supportive of a further rise in the US Treasury bond yields, which acts as a tailwind for the Greenback. Furthermore, the markets have been betting for more rate hikes by the European Central Bank (ECB) in the coming months and another 25 bps lift-off by the Bank of England (BoE) in May. This, in turn, might hold back traders from placing aggressive bullish bets around the non-yielding Gold price and keep a lid on any meaningful upside.

Traders now look to the US Q1 GDP report for a fresh impetus

Apart from this, a slight recovery in the global risk sentiment - as depicted by a stable performance around the equity markets - could further contribute to capping gains for the safe-haven precious metal, at least for the time being. Traders also seem reluctant and move to the sidelines ahead of the release of the Advance first-quarter US Gross domestic product (GDP) report, due later during the early North American session. The data, along with the US bond yields, will play a key role in influencing the USD price dynamics and allow traders to grab short-term opportunities around the US Dollar-denominated Gold price.