Gold remains below multi-month peak, downside seems limited amid Fed rate cut bets

• Gold price struggles to build on the overnight breakout momentum through a key barrier. 
• A modest recovery in the US bond yields and the USD act as a headwind for the XAU/USD.
• Bets that the Fed is done raising rates and may start easing its policy in 2024 to lend support.
• The focus remains on the US PCE data and the Fed’s preferred inflation gauge on Thursday.

Gold price (XAU/USD) pushed through the $2,008-2,010 horizontal barrier and advanced to the $2,018 region on Monday, or its highest level since mid-May. The precious metal, however, seems to struggle to capitalize on the breakout momentum and is seen consolidating in a narrow trading band through the first half of the European session on Tuesday. A modest US Dollar (USD) recovery from a near three-month low, supported by an uptick in the US Treasury bond yields, turns out to be a key factor acting as a headwind for the commodity. 

Any meaningful corrective slide for the Gold price, meanwhile, seems limited on the back of growing acceptance that the Federal Reserve (Fed) is done with its policy-tightening campaign. Moreover, the markets have been pricing in the possibility of a series of rate cuts in 2024. This should keep a lid on the US bond yields and the Greenback. Moreover, concerns about a global economic downturn and a generally weaker tone around the European equity markets should lend some support to the safe-haven precious metal. This, in turn, warrants caution for bearish traders ahead of this week’s release of the key inflation data from the US.

The US Personal Consumption Expenditure (PCE) Price Index is due on Thursday and will drive the USD demand in the near term, which, in turn, should provide a fresh directional impetus to the Gold price. In the meantime, traders on Tuesday will take cues from the Conference Board’s US Consumer Confidence Index and speeches by influential FOMC members. Nevertheless, dovish Fed expectations favour bullish traders, suggesting that any meaningful might still be seen as a buying opportunity and is more likely to remain cushioned. 

Daily Digest Market Movers: Gold price consolidates below multi-month top, rebounding USD acts as a headwind

• Growing acceptance that the Federal Reserve is done raising rates assists the non-yielding Gold price to hold steady above the $2,000 psychological mark.
• Softer US consumer inflation figures released two weeks ago lifted bets that the Fed will hold rates at the current levels and begin easing policy in 2024.
• Data released on Monday showed that sales of new single-family homes in the US fell more than expected in October as higher mortgage rates reduced affordability.
• A modest uptick in the US Treasury bond yields assists the US Dollar to stage a modest recovery from a near three-month low and cap gains for the XAU/USD.
• A positive risk tone further contributes to capping the safe-haven precious metal, though looming recession risks and dovish Fed expectations should limit losses. 
• Traders now look to the Conference Board’s US Consumer Confidence Index and speeches by Fed officials for some impetus later during the North American session.
• The market focus, meanwhile, will remain glued to the release of the Fed’s preferred inflation gauge – the core PCE Price Index – scheduled on Thursday.

Technical Analysis: Gold price seems poised to appreciated further, dips are likely to get bought into

From a technical perspective, the overnight breakout through the $2,008-2,010 horizontal barrier was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the downside. Hence, a subsequent move up towards testing the next relevant resistance, around the $2,035 region, looks like a distinct possibility. The momentum could get extended further towards the $2,048 intermediate hurdle en route to the YTD peak, around the $2,078 region touched in May.

On the flip side, the $2,010-2,008 resistance breakpoint now seems to protect the immediate downside ahead of the $2,000 mark. Some follow-through selling, leading to a subsequent slide below the $1,988-1,987 region, could pave the way for deeper losses. The Gold price might then accelerate the fall towards the $1,978 zone en route to the $1,967-1,966 area and the $1,955 support zone. A convincing break below the latter will expose the 200-day Simple Moving Average (SMA), currently pegged near the $1,942 region and the $1,935-1,934 confluence – comprising the 100- and the 50-day SMAs.