traders await US CPI on ThursdayGold price remains confined in a narrow range as traders await US CPI on Thursday
10 January 2024
• Gold price extends its consolidative price move above a multi-week low touched on Monday.
•The Fed rate cut uncertainty is holding back traders from placing aggressive directional bets.
• Elevated US bond yields underpin the USD and cap gains ahead of the US CPI on Thursday.
Technical Analysis: Gold price bears await a break below the 50-day SMA support near $2,017 area
From a technical perspective, the multi-week low, around the $2,017 area touched on Monday, which now coincides with the 50-day Simple Moving Average (SMA), should protect the immediate downside. A convincing break below could make the gold price vulnerable to accelerate the slide towards the $2,000 psychological mark. Some follow-through selling will expose the December swing low, around the $1,973 region, before the XAU/USD eventually drops to the $1,965-1,963 confluence, comprising the 100- and 200-day SMAs.
On the flip side, the $2,040-2,042 zone might continue to act as an immediate strong barrier, above which the Gold price could aim to retest Friday's swing high, around the $2,064 area. The next relevant hurdle is pegged near the $2,077 area, which if cleared decisively will negate any near-term negative outlook and set the stage for a move towards reclaiming the $2,100 round figure.
Gold price (XAU/USD) met with some supply following an uptick to the $2,040 area on Tuesday and finally settled with only modest gains on Tuesday. The precious metal continues with its struggle to gain any meaningful traction during the Asian session on Wednesday as traders seek more clarity on the Federal Reserve's (Fed) rate cut path before placing directional bets. Hence, the market focus will remain glued to the release of the latest consumer inflation figures from the United States (US) due on Thursday, which will play a key role in determining the near-term trajectory for the commodity.
Ahead of the key data risk, investors have been scaling back their expectations for a more aggressive policy easing by the Fed in the wake of a robust December US jobs report on Friday, which pointed to a still-resilient labor market. This remains supportive of elevated US Treasury bond yields and acts as a tailwind for the US Dollar (USD), capping the non-yielding Gold price. That said, geopolitical risks stemming from the Israel-Hamas war and persistent worries over a slow economic recovery in China – the world's second-largest economy – should lend some support to the safe-haven precious metal.
Daily Digest Market Movers: Gold price struggles for a firm direction amid mixed fundamental cues
• The uncertainty over the timing of when the Federal Reserve will start cutting interest rates holds back traders from placing fresh directional bets around the gold price.
The New York Fed reported on Monday that US consumers' projection of inflation fell to the lowest level in nearly three years in December, raising bets for an imminent shift in the Fed's policy stance.
Meanwhile, the resilient US economy, which is experiencing above-target inflation, gives the US central bank more headroom to keep interest rates higher for longer.
• This allows the yield in the benchmark 10-year US government bond to hold above the 4.0% threshold, which lends support to the US Dollar and caps the yellow metal.
Bearish traders, however, seem reluctant and prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due for release on Thursday.
Citing a senior US Defense Department official, CNBC reported late Tuesday that Iran-backed Houthi militants launched the largest attack to date on commercial merchant vessels.
A senior People's Bank of China official said this Wednesday that the central bank may use monetary policy tools to provide strong support for reasonable credit growth.
The official added that the PBoC will strengthen its counter-cyclical and cross-cycle policy adjustments to create favorable conditions for the country's economic growth.
• There isn't any relevant market-moving macro data scheduled for release from the US on Wednesday, leaving the XAU/USD at the mercy of the USD price dynamics.
