- Gold price recorded new buying interest on Thursday, but remains in its usual range.
- A softer USD, geopolitical risks and China’s economic problems are giving the XAU/USD a tailwind.
- Uncertainty over the Fed’s interest rate cut is likely to limit any significant rise in the run-up to the crucial US consumer price report.
Gold (XAU/USD) regains momentum on Thursday but remains below the $2,040-$2,042 supply zone or the upper bound of a multi-day trading range ahead of European trading. Furthermore, the precious metal remains within striking distance of a near three-week breakout reached on Monday, while the chances of more aggressive monetary easing by the Federal Reserve (Fed) are fading. However, some repositioning trades are being seen ahead of the key US consumer inflation figures, weighing on the US dollar (USD) and supporting the commodity.
Apart from that, the geopolitical risks arising from the war between Israeland Hamas and concerns about a slow recovery in China are keeping the price of the safe haven gold down. In the meantime, investors have scaled back their bets on an interest rate cut by the US Federal Reserve in March in view of the robust US economy. This continues to support the high yields on US government bonds and is likely to deter traders from making new bullish bets on the low-yielding yellow metal. Investors may also prefer to wait on the sidelines ahead of key US data that could provide clarity on the Fed’s rate-cutting path.
Daily Digest Market Moves: Gold price gets support from softer USD and some repositioning ahead of US CPI
Uncertainty over the Fed’s rate cut path is keeping dollar bulls on the defensive and helping gold prices gain some positive traction on some repositioning ahead of US consumer inflation numbers.
- The markets were quick to react to the Fed’s surprising dovish tilt at the December policy meeting and are now pricing in five interest rate cuts by the end of 2024, summing up to a cumulative of around 150 basis points (bps) of easing.
- The incoming US macro data underscored the fundamental resilience of the American economy, which, along with mixed signals from Fed officials, forced investors to scale back their expectations for more aggressive policy easing.
- New York Fed President John Williams said on Wednesday that the US central bank is in a ‘good place’ and has time to think about what’s next for rates, though would eventually need to get policy back to more neutral levels.
- The yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold and should cap any further gains for the non-yielding yellow metal ahead of the crucial US CPI report, due for release later today.
- The headline US CPI is expected to rise by 0.2% in December, lifting the yearly rate to 3.2% from 3.1%, while the core gauge (excluding food and energy prices) is anticipated to ease to 3.8% YoY from 4.0% in the previous month.
- Cooler-than-expected inflation data will give the Fed more reason to cut interest rates this year and turn out to be a negative trigger for the Greenback, which, in turn, should lead to a fresh leg up for the precious metal.
- Conversely, a stronger US CPI print should provide the US central bank more headroom to keep interest rates higher for longer and boost the buck, forcing the XAU/USD to break through a multi-week low touched on Monday.
Technical Analysis: Gold price builds on its steady intraday ascent, remains below $2,040-2,042 key barrier
From a technical perspective, any subsequent move up might continue to confront stiff resistance near the $2,040-2,042 region. A sustained strength beyond has the potential to lift the Gold price further towards last Friday’s swing high, around the $2,064 area en route to the $2,077 area. Some follow-through buying will negate any near-term negative outlook and set the stage for a move towards reclaiming the $2,100 round figure.
On the flip side, the $2,020 level, followed by the multi-week low around the $2,017-2,016 area and the 50-day Simple Moving Average (SMA), currently near the $2,013 region should protect any meaningful slide. A convincing break below the latter will be seen as a fresh trigger for bearish traders and drag the Gold price to the $2,000 psychological mark. Given that oscillators on the daily chart have just started gaining negative traction, the downward trajectory could extend further towards the December swing low, around the $1,973 region. The XAU/USD might eventually drop to the $1,965-1,963 confluence, comprising the 100- and 200-day SMAs.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.