- Gold price oscillates in a range and is influenced by a combination of diverging forces.
- Hawkish Fed expectations, elevated US bond yields and a bullish USD cap the upside.
- Geopolitical risks lend some support to the XAU/USD ahead of the key FOMC meeting.
Gold price (XAU/USD) struggles to capitalize on the previous day’s bounce from the $2,145 region, or over a one-week low and oscillates in a range during the Asian session on Tuesday. The robust US consumer and producer inflation figures released last week fuelled speculations that the Federal Reserve (Fed) will stick to its higher-for-longer interest rates narrative. This remains supportive of elevated US Treasury bond yields, which is seen underpinning the US Dollar (USD) and acting as a headwind for the non-yielding yellow metal.
The markets, however, are still pricing in the possibility that the Fed will begin its rate-cutting cycle as early as June. This, along with ongoing geopolitical tensions, offers some support to the safe-haven Gold price. Traders also seem reluctant to place directional bets ahead of the crucial two-day FOMC monetary policy meeting starting this Tuesday. The Fed decision is due on Wednesday and will be looked for cues about the rate-cut path, which will play a key role in driving the USD and provide fresh impetus to the precious metal.
Daily Digest Market Movers: Gold price traders seem non-committed amid uncertainty over Fed’s rate-cut path
- The stronger US inflation data fuelled speculations that the Federal Reserve will keep interest rates elevated, which, in turn, fails to assist the non-yielding Gold price to build on Monday’s bounce from over a one-week low.
- Markets are now pricing in less than three 25 basis point rate cuts this year and about a 51% chance that the Fed will begin the rate-cutting cycle at the June meeting, down sharply from expectations at the start of the year.
- Expectations that the Fed will stick to the higher-for-longer interest rates narrative push the yield on benchmark 10-year US government bond to a three-week high, underpinning the US Dollar and capping the commodity.
- The prolonged Russia-Ukraine war, along with the unrest in the Middle East, might continue to offer some support to the safe-haven XAU/USD and help limit deeper losses ahead of the crucial FOMC meeting starting today.
- Ukraine stepped up drone strikes on Russian oil refineries last week, while Israeli Prime Minister Benjamin Netanyahu confirmed plans to push into Gaza’s Rafah enclave, contributing to a climate of uncertainty.
- The focus, meanwhile, will be on whether Fed policymakers change their projections, or dot plots, for the economy and rate cuts for this year and the next two, which will determine the near-term trajectory for the XAU/USD.
Technical Analysis: Gold price needs to break below the $2,145 support for bears to seize near-term control
From a technical perspective, the recent pullback from the record peak stalled near the $2,145-2,144 support zone, which should now act as a key pivotal point for the Gold price. A convincing break below will expose the next relevant support near the $2,128-2,127 zone before the XAU/USD extends the corrective decline further towards the $2,100 round figure.
On the flip side, the $2,175-2,176 region now seems to have emerged as an immediate strong barrier, which if cleared should allow the Gold price to challenge the record peak, around the $2,195 area touched last week. Some follow-through buying beyond the $2,200 mark will set the stage for the resumption of the uptrend witnessed since the beginning of this month.
