Gold falls back as Fed maintains hawkish narrative

• Gold price falls as US Dollar recovers as Fed maintains the hawkish rhetoric.
• The US Dollar rebounds ahead of the US S&P Global PMI data, which will shed some light on the economic outlook.
• Geopolitical tensions keep safe-haven assets buoyant.

Gold price (XAU/USD) faces an intense sell-off after printing a fresh weekly high above $2,030 in Thursday’s early New York session. The precious metal struggles to hold a five-day winning streak as the Federal Open Market Committee (FOMC) Minutes of the late January policy meeting indicated that most Federal Reserve (Fed) policymakers are in no hurry to unwind the restrictive monetary policy stance. 

Fed policymakers are expected to keep interest rates unchanged in the range of 5.25%-5.50% until they get convinced that price stability can be achieved. Easing price pressures for some months could build confidence among Fed policymakers that inflation will sustainably decline to the 2% target.

Apart from that, lower weekly jobless claims have also improved the appeal for the US Dollar. The US Department of Labor reported that individuals claiming jobless benefits for the week ending February 16 for the first time were at 201K, lower than expectations of 218K and the prior reading of 213K. This reflects further improvement in labor market conditions.

On the geopolitical front, Middle East tensions have escalated as Israel intensifies its attacks in Rafah, which is a Palestinian city at the southern end of Gaza. Last week, Israeli Defense Minister Yoav Gallant identified Rafah as a shelter for over 1.4 million Palestinian refugees. This has significantly improved the appeal for safe-haven assets

Daily digest market movers: Gold price turns negative while US Dollar bounces back

• Gold price falls vertically from a 10-day high of around $2,050 as Federal Reserve policymakers maintain the hawkish narrative.
• The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, bounces back quickly to 104.00 as FOMC Minutes for the January policy meeting are aligned with market expectations.
• The FOMC Minutes for the January meeting showed that most Federal Reserve policymakers are concerned about the consequences of premature rate cuts, while a few pointed to economic risks associated with the overly stretched restrictive monetary policy stance.
• Price pressures could flare up again if the Fed rushes to reduce interest rates.
• Fed policymakers want to see more evidence that inflation will sustainably decline to the 2% target before commencing rate cuts.
• Sticky inflationary pressures and a resilient US economy have pushed back expectations for rate cuts in May.
• The CME FedWatch tool shows that interest rates are expected to remain unchanged in the range of 5.25%-5.50% in the March and May monetary policy meetings. However, chances for a rate cut by 25 basis points (bps) in the June policy meeting are around 53%.
• Richmond Federal Reserve Bank Thomas Barkin said on Wednesday that high inflation data in January has made the Fed’s job “harder.” However, Barkin added, “We should not put too much weight on the month’s information given known seasonality issues.”
• Thomas Barkin showed uncertainty over the achievement of a soft landing by the Fed.
• Meanwhile, investors await fresh data to get more cues about the outlook on interest rates. The S&P Global will report preliminary PMIs for February, which will be published at 14:45 GMT. 
• The Manufacturing PMI is forecasted to come out lower to 50.5 from 50.7 in January. The Services PMI, which represents a sector that accounts for two-thirds of the United States economy, is expected to release at 52.0, lower than the prior reading of 52.5.

Technical Analysis: Gold price drops from 10-day high near $2,035

Gold price struggles to hold its winning spell to the sixth day as geopolitical uncertainty deepens. The precious metal has printed a fresh 10-day high near $2,035. The yellow metal is expeditiously approaching the downward-sloping border of the Symmetrical Triangle chart pattern formed on a daily time frame, which is plotted from the December 28 high at $2,088. The upward-sloping border of the aforementioned chart pattern is placed from the December 13 low at $1,973.

The triangle could break out in either direction. However, the odds marginally favor a move in the direction of the trend before the formation of the triangle – in this case up. A decisive break above or below the triangle boundary lines would indicate a breakout is underway. 

The 14-period Relative Strength Index (RSI) marches toward 60.00. If the RSI manages to climb above the same, a bullish momentum will be activated.