Gold price extends range play amid mixed Fed rate cut cues; downside seems limited

• Gold price remains depressed during the Asian session, though it lacks bearish conviction.

• Fed Governor Waller’s dovish remarks weigh on the USD and could support the commodity.

• Reduced Fed rate cut bets should limit USD losses and warrant caution for the XAU/USD bulls.

Gold price (XAU/USD) struggles to capitalize on the overnight bounce from the $3,309 area, or a one-week low, and oscillates in a narrow trading band during the Asian session on Friday. The US Dollar (USD) moved further away from its highest level since June 23, touched on Thursday following dovish remarks from Federal Reserve (Fed) Governor Christopher Waller. Apart from this, concerns about US President Donald Trump's erratic trade policies and their impact on the global economy turn out to be key factors acting as a tailwind for the safe-haven commodity.

Any meaningful USD depreciation, however, seems elusive amid bets that the Fed will keep interest rates higher for longer amid the evidence that the Trump administration's increasing import taxes are passing through to consumer prices. This, along with the prevalent risk-on environment, holds back traders from placing fresh bullish bets around the non-yielding yellow metal and warrants caution before positioning for any further gains. Nevertheless, the XAU/USD pair, at current levels, remains on track to register modest losses for the first time in three weeks.

Daily Digest Market Movers: Gold price bulls seem reluctant as positive risk tone offsets modest USD weakness

• Federal Reserve (Fed) Governor Christopher Waller said late Thursday that rising risks to the economy favour easing the policy rate. The central bank should cut its interest rate target in July amid evidence that the labour market is growing weaker, Waller added further. This, in turn, exerts some downward pressure on the US Dollar during the Asian session on Friday.

• Meanwhile, traders are pricing in the possibility of 50 basis points worth of policy easing by the Fed this year. Furthermore, growing worries about the potential economic fallout from US President Donald Trump's erratic trade policies might continue to act as a tailwind for the safe-haven Gold price. Trump recently announced a 50% tariff on copper imports into the US.

• Adding to this, Trump notified leaders of 25 countries about new tariff rates that will kick in on August 1, and also plans to send letters to more than 150 countries notifying them their tariff rates could be 10% or 15%. This should keep investors on edge and warrants some caution before positioning for any meaningful depreciating move for the precious metal.

• On the economic data front, the US Commerce Department reported on Thursday that Retail Sales rose 0.6% in June, defying market expectations and signaling a modest rebound in consumer spending. This marked a significant improvement after a 0.9% fall in May and a 0.1% dip in April, providing a glimmer of optimism for an economy that has been struggling.

• Adding to this, US Initial Jobless Claims dropped for the fifth straight week, to 221,000 during the week ending July 12, or the lowest level in three months. This suggested that the US labor market remains resilient despite worries about the inflationary effect of higher US tariffs, reaffirming bets that the Fed could delay cutting interest rates and favoring the USD bulls.

• Fed governor Adriana Kugler said that the still-restrictive policy stance is important to keep longer-run inflation expectations anchored, and it will be appropriate to hold the policy rate at the current level for some time. Separately, Atlanta Fed President Raphael Bostic noted that the economic outlook remains highly uncertain and rate cuts might be difficult in the short run.

• The Fed is widely expected to keep its benchmark interest rate in the 4.25%-4.50% range at the upcoming policy meeting later this month. This, in turn, could act as a headwind for the non-yielding yellow metal. Traders now look forward to the release of the Preliminary Michigan US Consumer Sentiment and Inflation Expectations to grab short-term opportunities.

Gold price remains confined in multi-week-old range; $3,365-3,366 pivotal hurdle holds the key for bulls

From a technical perspective, the recent range-bound price action witnessed since the beginning of this month constitutes the formation of a rectangle chart pattern and points to indecision among traders. Moreover, neutral oscillators on the daily chart warrant some caution before positioning for the next leg of a directional move. Hence, any further slide might continue to find decent support ahead of the $3,300 round figure. A convincing break below, however, could make the Gold price vulnerable to accelerate the fall towards the July swing low, around the $3,248-3,247 zone.

On the flip side, any positive move beyond the $3,352 immediate hurdle could attract fresh buyers and remain capped near the $3,365-3,366 region, or the top boundary of the short-term trading range. A subsequent move beyond the latter, however, could trigger a short-covering rally and allow the Gold price to reclaim the $3,400 round figure. The upward trajectory could extend further towards testing the next relevant hurdle near the $3,434-3,435 area.