Market Data 
- Gold price bounces off a multi-week low, though the uptick lacks bullish conviction.
- Bets for a 25 bps Fed rate cut in November underpin the US and cap the XAU/USD.
- Investors now look to the release of the US CPI report for a fresh directional impetus.
Gold price (XAU/USD) struggles to capitalize on a modest Asian session uptick and remains close to a nearly three-week trough, around the $2,605-$2,604 area tested the previous day. The US Dollar (USD) touches a fresh eight-week high as traders now seem to have fully priced out the possibility of another interest rate cut by the Federal Reserve (Fed) in November. Apart from this, elevated US treasury bond yields cap the upside for the non-yielding yellow metal.
That said, this week’s repeated bounce from the vicinity of the $2,600 mark warrants caution before placing aggressive bearish bets around the Gold price and positioning for deeper losses. Traders might also prefer to move to the sidelines ahead of the release of the latest US consumer inflation figures. The crucial US Consumer Price Index (CPI) might influence Fed rate cut expectations, which will drive the USD demand and provide a fresh impetus to the XAU/USD.
Daily Digest Market Movers: Gold price bulls remain on the sidelines amid smaller Fed rate cut bets, stronger USD
- Minutes from the September FOMC meeting revealed that a majority supported the 50 basis point rate cut as the committee was confident of inflation moving toward the 2% goal.
- Some participants, however, indicated that they would have preferred only a 25 bps rate reduction, citing still elevated inflation, solid economic growth, and a low unemployment rate.
- Moreover, there was a consensus that the outsized rate cut would not lock the Federal Reserve into any specific pace for future cuts, lifting the US Dollar to a nearly two-month high.
- Dallas Fed President Lorie Logan pointed to meaningful uncertainties surrounding the economic outlook, though argued that she favored smaller rate reductions going forward.
- Boston Fed President Susan Collins stressed that policy is not on a pre-set path and will remain data-dependent and that it is important to preserve healthy labor market conditions.
- San Francisco Fed President Mary Daly said that one or two more rate cuts this year are likely, though noted that a 50 bps cut in September does not say anything about the size of next cuts.
- Traders are now pricing in a greater chance that the Fed will lower borrowing costs by only 25 bps in November and over a 20% probability that it will keep rates on hold in November.
- The yield on the rate-sensitive two-year US government bond shot to its highest yield since August 19 and the benchmark 10-year Treasury yield climbed to levels not seen since July 31.
- Investors remained wary of escalating tensions between Israel and Iran, with Israeli Defence Minister Yoav Gallant promising that a strike against the latter would be “lethal, precise and surprising”.
- This, along with some repositioning trade ahead of the crucial US Consumer Price Index (CPI) report, lends some support to the safe-haven Gold price during the Asian session on Thursday.
Technical Outlook: Gold price is more likely to attract fresh seller and remain capped near $2,630 support breakpoint
From a technical perspective, this week’s breakdown below the $2,630 area, representing the lower boundary of a short-term trading range, was seen as a key trigger for bearish traders. That said, oscillators on the daily chart – though have been losing traction – are holding in positive territory. Moreover, the Gold price, so far, has managed to hold above the $2,600 mark. This makes it prudent to wait for a sustained break and acceptance below the said handle before positioning for deeper losses. The XAU/USD might then extend the downfall towards the next relevant support near the $2,560 zone en route to the $2,535-2,530 region before eventually dropping to the $2,500 psychological mark.
On the flip side, the trading range support breakpoint, around the $2,630-2,635 region, now seems to act as an immediate hurdle. Any further move up could be seen as a selling opportunity and remain capped near the $2,657-2,658 horizontal barrier. A sustained strength beyond the latter could lift the Gold price to the $2,670-$2,672 supply zone, above which bulls might aim to challenge the all-time high, around the $2,685-2,686 zone touched in September. This is closely followed by the $2,700 mark, which if cleared will set the stage for an extension of a well-established multi-month-old uptrend.
