Gold price reverses modest intraday loses, remains confined in a familiar range

Gold price reverses an intraday dip amid geopolitical tensions, reiterating US bond yields and a softer USD.
Reduced bets for an early interest rate cut by the Fed to limit the USD losses and cap the upside for the metal.
Traders might also refrain from placing aggressive directional bets ahead of the flash global PMIs for January.

Gold price (XAU/USD) attracts some dip-buying near the $2,023-$2,022 ara on Wednesday and refreshes daily low during the early European session. The precious metal, however, remains confined in a familiar trading range held over the past four days and below the $2,040-$2,042 supply zone. Traders opt to wait for this week’s important US macro releases – the Advance Q4 GDP report on Thursday, followed by the Core PCE Price Index on Friday – for cues about the timing of when the Federal Reserve (Fed) will start cutting interest rates. This, in turn, will influence the near-term US Dollar (USD) price dynamics and determine the next leg of a directional move for the commodity.

In the meantime, traders on Wednesday will take cues from the global flash PMIs for January, which might provide a fresh insight into the global economic health and produce short-term trading opportunities around the Gold price. Meanwhile, geopolitical tensions in the Middle East, so far, have shown no signs of easing and continue to act as a tailwind for the safe-haven precious metal. Furthermore, retreating US Treasury bond yields undermine the USD and turn out to be another factor lending some support to the US Dollar-denominated commodity. This, in turn, warrants some caution for bearish traders and before positioning for an extension of a near one-month-old downtrend.

Daily Digest Market Movers: Gold price draws support from a combination of factors

Retreating US Treasury bond yields keep the US Dollar (USD) bulls on the defensive and turn out to be a key factor lending some support to the Gold price amid geopolitical tensions in the Middle East.
US military forces struck 3 facilities used by Iranian-affiliated militant groups in western Iraq in direct response to a series of escalatory attacks, raising the risk of a further escalation of tensions in the Middle East.
The incoming US macro data suggested that the economy is in good shape and gives the Federal Reserve more headroom to keep interest rates higher for longer, which should cap the non-yielding bullion.
The current market pricing indicates a greater chance of the first interest rate cut by the Fed in May, which was initially expected in March, and less aggressive policy easing than is now anticipated by investors.
The lack of strong follow-through buying warrants caution for bulls ahead of this week’s key macro releases – the flash global PMIs, the Advance US Q4 GDP print and the US Core PCE Price Index.
The crucial US inflation data will influence expectations about the Fed’s future policy actions, which, in turn, will drive the USD demand and determine the near-term trajectory for the XAU/USD.

Technical Analysis: Gold price needs to surpass $2,040-2,042 barrier for bulls to seize control

From a technical perspective, the $2,022-2,020 region might offer some support to the Gold price ahead of the weekly trough, around the $2,017-2,016 zone touched on Monday. This is followed by over a one-month low, around the $2,000 psychological mark set last week, which if broken decisively will be seen as a fresh trigger for bearish traders. The XAU/USD might then turn vulnerable to accelerate the fall towards the $1,988 intermediate support before eventually dropping to the 100-day Simple Moving Average (SMA), currently around the $1,972 area, en route to and the 200-day SMA, near the $1,964-1,963 region.

On the flip side, any meaningful strength beyond the $2,029-2,030 immediate hurdle might continue to confront stiff resistance near the $2,040-2,042 supply zone. Some follow-through buying, however, might negate the near-term bearish outlook and trigger a short-covering rally. The Gold price might then climb to the $2,077 area before aiming to reclaim the $2,100 round-figure mark.

Free Forex Signals