Gold price ticks higher ahead of US CPI report, not out of the woods yet

• Gold price bounces off a multi-week low amid subdued USD price action on Thursday.
• Bets for a regular 25 bps Fed rate cut in November should keep a lid on the XAU/USD.
• Investors now look to the release of the US CPI report for a fresh directional impetus.

Gold price (XAU/USD) edges higher during the Asian session on Thursday and for now, seems to have snapped a six-day losing streak to a nearly three-week low retested the previous day. The US Dollar (USD) enters a bullish consolidation phase as traders opt to move to the sidelines ahead of the release of the US Consumer Price Index (CPI) later today. Heading into the key data risk, some repositioning trade turns out to be a key factor lending some support to the precious metal.

Any meaningful appreciating move for the Gold price, however, seems elusive amid diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed). The expectations were reaffirmed by the September FOMC meeting minutes, which keeps the US Treasury bond yields elevated and should cap the non-yielding yellow metal. Hence, a strong follow-through buying is needed to confirm that the XAU/USD’s corrective slide from the all-time peak has run its course. 

Daily Digest Market Movers: Gold price ticks higher from some repositioning trade ahead of US CPI report

• Minutes from the September FOMC meeting revealed that a majority supported the 50 basis point rate cut as the committee was confident of inflation moving toward the 2% goal.
• Some participants, however, indicated that they would have preferred only a 25 bps rate reduction, citing still elevated inflation, solid economic growth, and a low unemployment rate. 
• Moreover, there was a consensus that the outsized rate cut would not lock the Federal Reserve into any specific pace for future cuts, lifting the US Dollar to a nearly two-month high.
• Dallas Fed President Lorie Logan pointed to meaningful uncertainties surrounding the economic outlook, though argued that she favored smaller rate reductions going forward.
• Boston Fed President Susan Collins stressed that policy is not on a pre-set path and will remain data-dependent and that it is important to preserve healthy labor market conditions.
• San Francisco Fed President Mary Daly said that one or two more rate cuts this year are likely, though noted that a 50 bps cut in September does not say anything about the size of next cuts. 
• Traders are now pricing in a greater chance that the Fed will lower borrowing costs by only 25 bps in November and over a 20% probability that it will keep rates on hold in November. 
• The yield on the rate-sensitive two-year US government bond shot to its highest yield since August 19 and the benchmark 10-year Treasury yield climbed to levels not seen since July 31.
• Investors remained wary of escalating tensions between Israel and Iran, with Israeli Defence Minister Yoav Gallant promising that a strike against the latter would be “lethal, precise and surprising”.
• This, along with some repositioning trade ahead of the crucial US Consumer Price Index (CPI) report, lends some support to the safe-haven Gold price during the Asian session on Thursday.

Technical Outlook: Gold price needs to find acceptance below the $2,600 mark for bears to seize control

From a technical perspective, this week’s breakdown below the $2,630 area, representing the lower boundary of a short-term trading range, was seen as a key trigger for bearish traders. That said, oscillators on the daily chart – though have been losing traction – are holding in positive territory. Moreover, the Gold price, so far, has managed to hold above the $2,600 mark. This makes it prudent to wait for a sustained break and acceptance below the said handle before positioning for deeper losses. The XAU/USD might then extend the downfall towards the next relevant support near the $2,560 zone en route to the $2,535-2,530 region before eventually dropping to the $2,500 psychological mark.

On the flip side, the trading range support breakpoint, around the $2,630-2,635 region, now seems to act as an immediate hurdle. Any further move up could be seen as a selling opportunity and remain capped near the $2,657-2,658 horizontal barrier. A sustained strength beyond the latter could lift the Gold price to the $2,670-$2,672 supply zone, above which bulls might aim to challenge the all-time high, around the $2,685-2,686 zone touched in September. This is closely followed by the $2,700 mark, which if cleared will set the stage for an extension of a well-established multi-month-old uptrend.