Gold price extends the range play ahead of the Fed’s preferred inflation gauge

Gold price struggles to gain any meaningful traction as traders await a fresh catalyst.
The Fed’s higher-for-longer interest rates narrative caps the upside for the XAU/USD.
Traders also prefer to wait on the sidelines ahead of the US PCE Price Index release.

Gold price (XAU/USD) extends its sideways consolidative price move through the first half of the European session as traders opt to wait for more cues about the Federal Reserve’s (Fed) rate-cut path before placing fresh directional bets. Hence, the focus will remain glued to the release of the US Personal Consumption Expenditures (PCE) Price Index. Any signs of sticky inflation will further reinforce bets that the Fed will keep rates higher for longer, which, in turn, should boost the US Dollar (USD) and prompt some selling around the non-yielding yellow metal.

In the run-up to the key data, the USD bulls seem reluctant and remain on the sidelines, which, along with the cautious mood around the equity markets, lend some support to the safe-haven Gold price. Meanwhile, the lack of any meaningful buying warrants caution before confirming that the XAU/USD has formed a near-term bottom and positioning for the resumption of the recent recovery from the $1,984 region, or the YTD low touched earlier this February.

Daily digest market movers: Gold price awaits US PCE Price Index for a fresh directional impetus

The nervousness ahead of the crucial US inflation data tempers investors’ appetite for riskier assets and lends support to the safe-haven Gold price amid a modest US Dollar downtick.
Several Federal Reserve officials reiterated on Wednesday that more work was needed to bring down inflation, which should allow the central bank to keep interest rates higher for longer.
New York Fed President John Williams said that the US central bank will begin cutting interest rates in 2024, albeit in the latter half of the year as the path to the 2% inflation target is uneven.
Atlanta Fed President Raphael Bostic said that he is comfortable advising patience when it comes to loosening policy and that the central bank has not declared victory over inflation yet.
Separately, Boston Fed Bank President Susan Collins said that the central bank will likely cut rates this year, though should be taking time to assess data before making any change to the policy.
The second estimate of the US GDP growth released on Wednesday showed that the US economy expanded by a 3.2% annualized pace in Q4, slightly less than the 3.3% rise reported originally.
The data, meanwhile, reinforced the view that the US economy remains in good shape and hawkish Fed expectations, though does little to provide any meaningful impetus to the US Dollar.
Nevertheless, the Fed’s hawkish outlook on interest rates might cap any further appreciating move for the non-yielding metal ahead of the US Personal Consumption Expenditures (PCE) Price Index.
Thursday’s US economic docket also features the release of Weekly Initial Jobless Claims, the Chicago PMI and Pending Home Sales, which, along with Fed speak, could provide some impetus.

Technical analysis: Gold price traders seem non-committed, remains below the $2,040-2,042 resistance

From a technical perspective, sustained strength beyond the $2,041-2,042 hurdle will be seen as a fresh trigger for bulls and lift the Gold price further towards the next relevant hurdle near the $2,065 region. Given that oscillators on the daily chart have just started gaining positive traction, the momentum could extend further and allow the XAU/USD to aim back to reclaim the $2,100 round-figure mark.

On the flip side, the weekly low. around the $2,025-2,024 area, touched the previous day, might continue to lend some support ahead of the 100-day SMA, currently near the $2,013-2,012 region. This is followed by the $2,000 psychological mark, which if broken might shift the near-term bias in favour of bearish traders and drag the Gold price to the $1,984 support en route to the very important 200-day SMA, near the $1,968 zone.