Gold price consolidates Tuesday’s hot US CPI-inspired losses, holds above $2,150 level

■  Gold price gains some positive traction on Wednesday amid a softer US Dollar.

■  Despite the warmer US CPI report, June Fed rate cut bets undermine the buck.

■  Geopolitical risks stemming from conflicts in the Middle East also lend support.

Gold price (XAU/USD) attracts some dip-buying during the Asian session on Wednesday and reverses a part of the previous day's profit-taking slide to the $2,150 area, or the weekly low. The US Treasury bond yields ticked higher on Tuesday after the US consumer inflation for February came in a bit warmer than expected, which, in turn, boosted the US Dollar (USD) and exerted some downward pressure on the commodity. Furthermore, an extension of the bullish run in the US equity markets further contributed to driving flows away from the safe-haven precious metal.

The markets, however, are still pricing in a greater chance that the Federal Reserve (Fed) will start cutting interest rates at the June policy meeting. This keeps a lid on the US bond yields and the Greenback, which, in turn, helps limit the downside for the non-yielding Gold price. Traders also seem reluctant to place aggressive bearish bets around the safe-haven XAU/USD amid geopolitical risks and expectations that the global economy might weaken in 2024. Investors might also prefer to move to the sidelines ahead of the crucial FOMC monetary policy meeting next week.

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

A hot US inflation report fuelled speculations that the Federal Reserve may delay interest rate cuts and pushed the US Treasury bond yields, underpinning the US Dollar and weighing on the Gold price on Tuesday.

The headline US Consumer Price Index (CPI) rose by the 3.2% YoY rate in February from the 3.1% previous and expected, while the annual Core CPI came in at 3.8%, slightly above estimates for a reading of 3.7%.

According to the CME Group's FedWatch tool, the markets are still pricing in around a 70% chance that the US central bank will cut interest rates in June, which caps the USD and limits losses for the XAU/USD.

A Qatari official said on Tuesday that Israel and Hamas are not close to a deal to halt the fighting in Gaza and free hostages, and warned that the situation remained very complicated despite weeks of truce talks.

Iran-aligned Houthi rebels in Yemen said that they would escalate their military operations during the Muslim holy month of Ramadan in solidarity with Palestinians and response to the ongoing war in Gaza.

The United States conducted six self-defence strikes, destroying an unmanned underwater vessel and 18 anti-ship missiles in retaliation to the two anti-ship ballistic missiles fired into the Red Sea by the Houthis.

This should help limit the downside for the safe-haven precious metal as traders look to next week's highly anticipated FOMC meeting for cues about the rate-cut path and before placing fresh directional bets.

Technical Analysis: Gold price could weaken  further once the overnight low around $2,150 is broken

From a technical perspective, the overnight swing low, around the $2,150 area, now seems to protect the immediate downside. Against the backdrop of the overbought Relative Strength Index (RSI) on the daily chart, a convincing break below might prompt some technical selling and drag the Gold price to the next relevant support near the $2,128-2,127 zone. The subsequent slide might expose the $2,100 round figure, which should act as a strong base for the XAU/USD and a key pivotal point for short-term traders.

On the flip side, any further move up is likely to face some resistance around the $2,174-2,175 region ahead of the $2,195 area, or the record peak touched last Friday. Some follow-through buying beyond the $2,200 mark will push the Gold price to the uncharted territory and set the stage for the resumption of the recent blowout rally witnessed over the past two weeks or so.