- Gold price drifts lower for the second successive day amid receding geopolitical tensions.
- Reduced Fed rate cut bets continue to underpin the USD and contribute to the downfall.
- The fundamental backdrop warrants some caution before placing aggressive bearish bets.
Gold price (XAU/USD) adds to the previous day’s heavy losses – marking its biggest daily slide since June 2022 – and remains under some selling pressure for the second straight day on Tuesday. Receding fears about a wider Middle East conflict remain supportive of a generally positive risk tone, which, in turn, is seen as a key factor driving flows away from the safe-haven metal. Apart from this, reduced bets for interest rate cuts by the Federal Reserve (Fed) underpin the US Dollar (USD) and drag the non-yielding yellow metal to over a two-week low.
However, speculations that major central banks will cut interest rates this year assist the Gold price to reverse an intraday dip to sub-$2,300 levels. Traders also seem reluctant to place aggressive bets and prefer to wait for the release of flash PMI prints for cues about global economic health, which tends to influence demand for traditional safe-haven assets. The focus, meanwhile, will remain glued to the Advance US Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index, due on Thursday and Friday, respectively.
Daily Digest Market Movers: Gold price is undermined by receding safe-haven demand, hawkish Fed expectations
- Iran signaled that it has no plans to retaliate against the Israeli limited-scale missile strike on Friday, which, in turn, drives flows away from the safe-haven Gold price for the second straight day on Tuesday.
- Stronger-than-expected US payrolls data, along with the hotter consumer price inflation and hawkish comments from Federal Reserve officials, forced investors to scale back their bets for US interest rate cuts.
- The current market pricing suggests that the Fed could start its rate-cutting cycle in September and deliver only 34 basis points, or less than two rate cuts in 2024 as compared to three projected by the central bank.
- The yield on the benchmark 10-year US government bond holds steady just below a five-month high touched last week and continues to act as a tailwind for the US Dollar, further exerting pressure on the XAU/USD.
- Concerns about slowing global economic growth support prospects for synchronized interest-rate cuts by most major central banks in the second half of this year, which, in turn, could lend support to the commodity.
- Traders look to the flash global PMI prints on Tuesday, which, along with the Advance US Q1 GDP report and the US Personal Consumption Expenditures (PCE) Price Index later this week, should provide a fresh impetus.
Technical Analysis: Gold price needs to find acceptance below the $2,300 mark for bears to seize near-term control
From a technical perspective, a sustained break and acceptance below the 23.6% Fibonacci retracement level of the February-April rally support prospects for a further intraday depreciating move. That said, oscillators on the daily chart – though they have been losing traction – are still holding in the positive territory and warrant some caution for bearish traders. Hence, it will be prudent to wait for some follow-through selling below the $2,300 mark before positioning for deeper losses. The Gold price might then slide to the $2,260-2,255 area, or the 38.2% Fibo. level, before dropping to the $2,225 intermediate support en route to the $2,200-2,190 confluence, comprising the 50% Fibo. level and the 50-day Simple Moving Average (SMA).
On the flip side, any attempted recovery might now confront immediate resistance near the $2,325 region. A sustained move beyond, however, should allow the Gold price to accelerate the momentum towards the $2,350-2,355 intermediate hurdle en route to the $2,380 supply zone. This is closely followed by the $2,400 round figure, and the all-time peak near the $2,431-2,432 area, which, if cleared, will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent blowout rally witnessed over the past two months or so.
