Gold regains positive traction amid Fed rate cut bets and safe-haven demand

• Gold stalls the overnight pullback from a record high amid a combination of supporting factors.

• Fed rate cut bets and reviving safe-haven demand offer some support to the precious metal.

• A modest USD uptick and a positive risk tone might act as headwinds for the XAU/USD pair.

Gold (XAU/USD) attracts some dip-buyers near the $3,620 area during the Asian session on Wednesday, and for now, seems to have stalled its retracement slide from the all-time peak touched the previous day. The growing acceptance that the US Federal Reserve (Fed) will lower borrowing costs next week and deliver three rate cuts by the end of this year continues to offer support to the non-yielding yellow metal. Apart from this, persistent trade-related uncertainties, rising geopolitical tensions, and  French and Japanese political jitters turn out to be other factors benefiting the safe-haven commodity.

Meanwhile, the US Dollar (USD) is seen building on the previous day's recovery move from its lowest level since July 28 amid some repositioning trade ahead of the crucial US inflation figures. Apart from this, a generally positive tone around the equity markets might keep a lid on any meaningful appreciating move for the Gold price. Nevertheless, the fundamental backdrop seems tilted in favor of the XAU/USD bulls, suggesting that any corrective pullback might still be seen as a buying opportunity. Traders now look forward to the release of the US Producer Price Index (PPI) for some impetus later today.

Daily Digest Market Movers: Gold price draws support from Fed rate cut bets, political jitters, geopolitical risks

An unexpectedly weak US jobs data released last Friday provided further evidence of a softening labor market and led markets to price in three interest rate cuts by the US Federal Reserve through the year-end. Moreover, the CME Group's FedWatch Tool indicates a small possibility of a jumbo 50-basis-point rate cut at next week's FOMC policy meeting.

The Financial Times reported on Tuesday that US President Donald Trump has urged the European Union (EU) to impose 100% tariffs on Chinese and Indian goods in an effort to pressure Russian President Vladimir Putin. The report further stated that the Trump administration is prepared to "mirror" any tariffs imposed by the EU on Indian and Chinese imports.

France's Prime Minister Francois Bayrou lost a vote of confidence in the National Assembly, resulting in his resignation. Moreover, Japan's Prime Minister Shigeru Ishiba announced over the weekend that he will step down as President of the ruling Liberal Democratic Party (LDP).

On the geopolitical front, Israel carried out an air strike targeting Hamas leadership in Qatar's capital, Doha, drawing widespread global condemnation. Qatar's Prime Minister said that his country reserves the right to respond to Israel's blatant attack. Given that Qatar is  a key mediator, this could impact ceasefire negotiations between Israel and Hamas.

Poland placed its air defenses on high alert in response to Russia's heaviest air assaults on Ukraine in recent weeks, which have raised concerns about the proximity of the strikes to its border. Moreover, Ukraine’s Air Force warned of a suspected Russian drone incursion into Polish airspace, breaching the North Atlantic Treaty Organization (NATO) airspace.

A federal judge on Tuesday temporarily blocked Trump from removing Fed Governor Lisa Cook. This eases market concerns about the Fed's independence, which, along with some repositioning trade ahead of the crucial US inflation data, assists the US Dollar to preserve the previous day's recovery gains and might cap the upside for the precious metal.

Wall Street’s three major indices posted record closing highs on Tuesday, and the spillover effect leads to a further rise in the Asian equity markets. This might further contribute to keeping a lid on the safe-haven commodity and warrants some caution. Traders now look forward to the release of the US Producer Price Index (PPI) for a fresh impetus later today.

The focus will then shift to the US Consumer Price Index (CPI) on Thursday, which will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move for the XAU/USD pair.

Gold might consolidate amid still overbought daily RSI; weekly low around $3,580 holds the key for bulls

From a technical perspective, the daily Relative Strength Index (RSI) remains in overbought territory and makes it prudent to wait for some near-term consolidation or a further pullback before any further move higher. That said, the $3,600 round-figure mark could protect the immediate downside. This is followed by the weekly low, around the $3,580 region, below which the Gold price could extend the corrective slide towards the $3,565-3,560 intermediate support en route to last Thursday's swing low, around the $3,510 region.

On the flip side, the $3,640-3,645 zone could act as an immediate hurdle ahead of the all-time peak, around the $3,675 area touched the previous day. Some follow-through buying could allow the Gold price to build on the recent breakout momentum and aim towards conquering the $3,700 round figure. The broader technical setup, however, suggests that bulls might refrain from placing aggressive bets, suggesting that the said handle could act as a strong near-term barrier for the XAU/USD pair.