■ Gold price struggles to gain any meaningful traction amid a combination of diverging forces.
■ Geopolitical risks and China’s economic woes lend some support to the safe-haven XAU/USD.
■ Hawkish Fed expectations underpin the USD and act as a headwind for the non-yielding metal.
Gold price (XAU/USD) is Trump Gold Barseen oscillating in a narrow trading band during the Asian session on Tuesday and consolidating its recent losses, to over a one-week low around the $2,015 region touched the previous day. A slight deterioration in the global risk sentiment is seen as a key factor lending some support to the safe-haven precious metal, though a bullish US Dollar (USD) and bets that the Federal Reserve (Fed) might not cut interest rates as much as anticipated act as a headwind.
The incoming US macro data continue to point to a still resilient economy and give the Fed more headroom to keep rates higher for longer. Adding to this, hawkish comments by several Fed officials, including Fed Chair Jerome Powell, forced investors to continue scaling back their expectations for a more aggressive policy easing in 2024. This had been a key factor behind the recent sharp rise in the US Treasury bond yields, which should underpin the buck and cap gains for the Gold price.
Daily Digest Market Movers: Gold price consolidates near one-week low amid mixed fundamental cues
Persistent worries about geopolitical tensions stemming from conflicts in the Middle East and slowing economic growth in China lend some support to the safe-haven Gold price.
The Institute for Supply Management (ISM) reported on Monday that the US services sector growth picked up pace in January amid an increase in new orders.
The US ISM Non-Manufacturing PMI increased to 53.4 last month from 50.5 in December, with a measure of input prices or the Prices Paid sub-component rising to an 11-month high.
This comes on top of Friday's blowout US jobs report and reaffirmed the view that the economy is in good shape, diminishing the chances of a rate cut by the Federal Reserve in March.
Moreover, hawkish comments by several Fed officials suggest that the first-rate cut might not come until May or June, which remains supportive of elevated US Treasury bond yields.
The yield on the rate-sensitive 2-year US government bond climbed to a one-month top on Monday and the benchmark 10-year US Treasury yield holds comfortably above the 4.0% mark.
The US Dollar stands tall near its highest level in almost three months and might further contribute to capping any meaningful appreciating move for the non-yielding yellow metal.
In an interview with the CBS News show 60 Minutes that aired on Sunday, Fed Chair Jerome Powell said that the central bank could be patient in deciding when to cut interest rates.
Minneapolis Fed President Neel Kashkari argued that a possibly higher neutral rate means that the central bank can take more time to assess upcoming data before beginning interest rate cuts.
Chicago Fed President Austan Goolsbee noted that there have been seven months of good inflation reports, though did not comment on the timing of the first interest rate cut.
China’s Central Huijin Investment company reportedly said that it will increase its investment in Chinese stock ETFs and are determined to safeguard the stable operation of the market.
Technical Analysis: Gold price could accelerate the fall once the $2,000 mark is broken
From a technical perspective, some follow-through selling below the $2,012-2,010 area might expose the $2,000 psychological mark. A convincing break below the latter will be seen as a fresh trigger for bearish traders and drag the Gold price to the 100-day Simple Moving Average (SMA) support, currently pegged around the $1,984-1,983 zone. The XAU/USD could eventually drop to challenge the very important 200-day SMA, near the $1,965 region.
On the flip side, momentum beyond the 50-day SMA, near the $2,033 area, is likely to confront resistance near the $2,054-2,055 zone ahead of the $2,065 region, or last week's swing high. Given that oscillators on the daily chart are just holding in the positive territory, some follow-through buying has the potential to lift the Gold price towards the $2,078-2,079 region, or the YTD peak set in January. The subsequent move-up should allow the XAU/USD to reclaim the $2,100 mark and climb further to the next relevant hurdle near the $2,020 region.
