Gold price edges higher in a familiar trading range, remains below 50-day SMA
■ Gold price draws some support from escalating geopolitical tensions in the Middle East.
■ Sliding US bond yields also benefit the XAU/USD, though a bullish USD caps the upside.
■ Traders also seem reluctant ahead of the crucial two-day FOMC monetary policy meeting.
Gold price (XAU/USD) kicks off the new week on a positive note, albeit struggles to build on strength and remains below the 50-day Simple Moving Average (SMA) during the Asian session. Traders now seem reluctant and opt to wait for more cues about the timing of when the Federal Reserve (Fed) will start cutting interest rates before placing fresh directional bets. Hence, the focus will remain glued to the outcome of the highly-anticipated two-day FOMC monetary policy meeting starting on Tuesday.
In the meantime, the killing of three US Army soldiers in a drone attack by radical Iran-backed militant groups raises the risk of a major escalation of geopolitical tensions in the Middle East. Adding to this, a generally weaker tone around the equity markets should act as a tailwind for the safe-haven Gold price. That said, diminishing odds for a more aggressive policy easing by the Fed act as a tailwind for the US Dollar (USD) and hold back bulls from placing aggressive bets around the XAU/USD.
Daily Digest Market Movers: Gold price is underpinned by reviving safe-haven demand; follow-through lacking
The risk of a further escalation of geopolitical tensions in the Middle East weighs on investors' sentiment and lends support to the safe-haven Gold price on the first day of a new week.
A drone attack on a US base in Jordan killed three US soldiers, marking the first death of US service personnel in the region since the Hamas-Israel war broke out on October 7.
President Joe Biden doubled down on his pledge of reprisals and said that the US shall respond and hold all those responsible to account at a time and in a manner of our choosing.
The US Dollar (USD) holds steady just below a one-month peak as investors continue to scale back their expectations for a more aggressive easing by the Federal Reserve.
Data released on Friday, however, showed that inflation rose modestly in December and reaffirmed expectations that the Fed will start cutting interest rates by the middle of 2024.
The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index held steady at 2.6% on a yearly basis in December.
Meanwhile, the annual Core PCE Price Index – considered the Fed's preferred gauge of inflation – decelerated more than expected, to 2.9% from 3.2% in November.
Other details of the publication showed that Personal Spending rose 0.7% in December while Personal Income grew 0.3%, pointing to strong demand from US consumers.
This comes on top of the stronger US Q4 GDP print earlier last week and suggested that the economy is still in good shape, further fuelling optimism about a soft landing.
A modest decline in the US Treasury bond yields keeps a lid on any further gains for the Greenback and might continue to act as a tailwind for the non-yielding yellow metal.
Traders might also prefer to wait for the FOMC meeting starting on Tuesday and this week's key US macro data, including the Nonfarm Payrolls (NFP) report on Friday.
Technical Analysis: Gold price needs to find acceptance above the 50-day SMA for bulls to seize intraday control
From a technical perspective, any subsequent move beyond the 50-day SMA hurdle, currently around the $2,027-2,028 region, might continue to attract some sellers near the $2,040-2,042 supply zone. A sustained strength beyond the latter could trigger a short-covering rally and lift the Gold price further to the $2,077 intermediate hurdle en route to the $2,100 round-figure mark.
On the flip side, immediate support is pegged near the $2,012-2,010 area ahead of the $2,000 psychological mark. Some follow-through selling will be seen as a fresh trigger for bearish traders and expose the 100-day SMA, currently near the $1,977-1,976 area. The Gold price could eventually drop to test the very important 200-day SMA, near the $1,964-1,963 region.
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