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Gold price struggles for a firm intraday direction, hover above $2,300

Gold price struggles for a firm intraday direction, hover above $2,300

By Haresh Menghani

  • Gold price fails to lure buyers amid a fresh leg up in the US bond yields, modest USD uptick.
  • A positive risk tone also contributes to capping the upside for the safe-haven precious metal.
  • Traders, however, might prefer to wait for the US NFP report before placing aggressive bets.

Gold price (XAU/USD) struggles to capitalize on the previous day’s goodish recovery from the $2,282-2,281 region or a nearly four-week low and oscillates in a narrow band during the Asian session on Thursday. As was widely anticipated, the Federal Reserve (Fed) kept its benchmark interest rate unchanged at the end of a two-day meeting on Wednesday, though it reiterated that it wants to gain greater confidence that inflation will continue to fall before cutting rates. This, in turn, triggers a fresh leg up in the US Treasury bond yields, which lends some support to the US Dollar (USD) and acts as a headwind for the non-yielding yellow metal. 

In the post-meeting press conference, Fed Chair Jerome Powell acknowledged that the progress towards the 2% annual inflation target had largely stalled, though dismissed the prospect of a rate hike. This, along with easing fears about a further escalation of geopolitical tensions in the Middle East, boosts investors’ appetite for riskier assets and turns out to be another factor contributing to capping the upside for the safe haven Gold price. That said, the recent repeated failures to find acceptance below the $2,300 mark warrants caution for bearish traders and positioning for further losses ahead of the release of the US Nonfarm Payrolls (NFP) on Friday.

Daily Digest Market Movers: Gold price is undermined by a combination of factors, though the downside remains cushioned

  • Federal Reserve Chair Jerome Powell warned on Wednesday that interest rates will remain high for longer as disinflation has slowed in recent months and acts as a headwind for the Gold price. 
  • The US Treasury bond yields reversed a part of the previous day’s post-FOMC slide, helping revive the demand for the US Dollar and contributing to capping the upside for the non-yielding yellow metal. 
  • Meanwhile, the global risk sentiment got a boost after Powell signaled that the next move from the Fed was still likely to be an interest rate cut, which further undermines the safe-haven XAU/USD.
  • This, along with easing geopolitical tensions, suggests that the path of least resistance for the commodity is to the downside, though the lack of selling warrants caution for bearish traders. 
  • Investors might also prefer to move to the sidelines ahead of the release of the closely watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday.
  • In the meantime, Thursday’s US economic docket – featuring Challenger Job Cuts, the usual Weekly Initial Jobless Claims, and Trade Balance data – will be looked upon for short-term trading impetus.

Technical Analysis: Gold price could slide further once the 50% Fibo. level support near the $2,280 area is broken decisively

From a technical perspective, weakness back below the $2,300 mark now seems to find decent support near the $2,280 level. The latter coincides with the 50% Fibonacci retracement level of the March-April rally, which, if broken decisively, should pave the way for deeper losses. The Gold price might then accelerate the fall towards the next relevant support near the $2,268-2,265 area en route to the $2,230-2,225 region and the $2,200 round figure.

On the flip side, the immediate hurdle is pegged near the $2,335 supply zone ahead of the weekly top, around the $2,352-2,353 area. A sustained strength beyond could lift the Gold price to the $2,371-2,372 resistance en route to the $2,400 round figure and the all-time peak, around the $2,431-2,432 area touched on April 12.

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