By Haresh Menghani
- Gold price struggles to gain traction and is influenced by a combination of diverging forces.
- Doubts about whether the Fed will cut rates three times this year lift the USD and cap gains.
- Traders also prefer to wait on the sidelines ahead of the US PCE Price Index data on Friday.
Gold price (XAU/USD) continues with its struggle to gain any meaningful traction and remains confined in a narrow trading band, below the $2,200 mark through the early European session on Wednesday. Traders now seem reluctant and opt to wait for more cues about the Federal Reserve’s (Fed) policy path before placing fresh directional bets. Hence, the focus will remain glued to the release of the US Personal Consumption and Expenditure (PCE) Price Index on Friday. The data should play a key role in driving the US Dollar (USD) demand and provide some meaningful impetus to the non-yielding yellow metal.
Meanwhile, the Fed last week indicated that it remains on track to cut interest rates by 75 basis points in 2024, which continues to act as a tailwind for the Gold price. That said, Tuesday’s slightly better-thane-expected US Durable Goods Orders validated the view that the US economy is in good shape. Apart from this, still-sticky inflation might force the Fed to keep interest rates higher for longer, which remains supportive of elevated US Treasury bond yields. This, in turn, lifts the US Dollar (USD) back closer to a multi-week high touched last Friday and keeps a lid on any further gains for the XAU/USD.
Daily Digest Market Movers: Gold price awaits cues about Fed’s rate-cut path before the next leg of a directional move
- The Federal Reserve last week projected a less restrictive monetary policy going forward and signaled three rate cuts by year-end, which act as a tailwind for the non-yielding Gold price.
- Russia ramped up its attacks on Ukrainian energy infrastructure in response to a spate of recent drone strikes on its oil refineries by the latter, raising the risk of a further escalation of tensions.
- Iran-backed Houthi militants on Tuesday said they had mounted six attacks on ships in the Gulf of Aden and the Red Sea over the past 72 hours, tempering investors’ appetite for riskier assets.
- The US Dollar adds to the previous day’s modest gains that followed data showing that US Durable Goods Orders data rose by 1.4% in February as compared to the 6.2% slump in the previous month.
- Separately, the Conference Board reported that the US Consumer Confidence Index dipped to 104.7 in March, little changed from the previous month’s reading of 104.8 amid fading fears of a recession.
- Furthermore, consumers’ inflation expectations ticked up to 5.3% during the reported month from 5.2% in February, which might force the Federal Reserve to keep interest rates higher for longer.
- The outlook keeps the yield on the benchmark 10-year US government bond afloat above the 4.0% threshold and continues to underpin the Greenback, warranting caution for the XAU/USD bulls.
- Traders might also prefer to wait for the release of the US Personal Consumption and Expenditure (PCE) Price Index for more cues about the Fed’s policy path and before placing fresh directional bets.
Technical Analysis: Gold price bulls have the upper hand while above $2,164-2,163 support zone
From a technical perspective, the range-bound price action witnessed over the past two weeks or so might be categorized as a bullish consolidation phase against the backdrop of a blowout rally since the beginning of this month. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and support prospects for an eventual breakout to the upside. Some follow-through buying back above the $2,200 mark will reaffirm the constructive setup and allow the Gold price to retest the record high, around the $2,223 region touched last week.
On the flip side, any corrective decline is likely to find some support near the $2,164-2,163 area ahead of the $2,156-2,155 zone and the $2,147-2,146 region. A convincing break below the latter might prompt aggressive technical selling and drag the Gold price further towards the next relevant support near the $2,128-2,127 region en route to the $2,100 round-figure mark. The said handle should act as a strong base for the XAU/USD, which, if broken decisively, will suggest that the XAU/USD has topped out in the near term and will pave the way for deeper losses.
