Gold price consolidates above $2,400, looks to global PMIs for some impetus

■  Gold price struggles to capitalize on the previous day’s recovery from over a one-week trough.

■  The USD climbs to a nearly two-week high on Wednesday and acts as a headwind for the metal. 

■  A softer risk tone and dovish Fed expectations should limit the downside ahead of global PMIs.

Gold price (XAU/USD) registered modest gains on Tuesday and snapped a four-day losing streak to a one-and-half-week low touched the previous day. The US Treasury bond yields edged lower after a weak housing market report and Vice President Kamala Harris won enough support to become the Democrats’ likely nominee in the November 5 general election. Apart from this, a slight deterioration in the global risk sentiment – as depicted by a weaker tone across the global equity markets – drove some haven flows towards the precious metal and contributed to the positive move. 

The supporting factors, to a larger extent, were offset by a further US Dollar (USD) recovery from a nearly four-month trough, which acted as a headwind for the Gold price during the Asian session on Wednesday. Traders also seem reluctant and prefer to wait for more cues about the Fed's policy path before positioning for the next leg of a directional move for the non-yielding yellow metal. Hence, the focus remains on the release of the US Personal Consumption Expenditures (PCE) Price Index data on Friday. In the meantime, traders will take cues from the global flash PMIs due later today.

Daily Digest Market Movers: Gold price bulls remain on the sidelines amid mixed fundamental cues

A modest slide in the US Treasury bond yields, along with a softer risk tone, assisted the Gold price to gain positive traction on Tuesday and move away from over a one-week low touched the previous day. 

The National Association of Realtors reported that US existing home sales fell 5.4% in June to a seasonally adjusted annual rate of 3.89 million units – the lowest since December and missing consensus estimates.

The most recent survey from the Federal Reserve Bank of Richmond showed that manufacturing activity worsened in July and the composite manufacturing index fell to -17 in July from -10 in the previous month. 

US Vice President Kamala Harris secured the support of enough delegates to clinch the Democratic nomination, which prompted some unwinding of the 'Trump trade' and dragged the US bond yield lower. 

Investors, meanwhile, largely expect the US central bank to start lowering borrowing costs at its September meeting and have been pricing in the possibility of two more rate cuts by the end of this year. 

This, in turn, offers some support to the non-yielding yellow metal, though some follow-through US Dollar buying keeps a lid on any further appreciating move as traders await the key US macroeconomic data.

The US Gross Domestic Product (GDP) report for the second quarter will be released on Thursday and will be followed by the crucial Personal Consumption Expenditures (PCE) Price Index data for June on Friday.

This will provide fresh insight into the Fed's path for interest rates, which will play a key role in influencing the USD price dynamics and help in determining the next leg of a directional move for the XAU/USD.

In the meantime, Wednesday's release of flash PMIs will be looked upon for cues about the health of the global economy and allow traders to grab short-term opportunities around the precious metal.

Technical Analysis: Gold price needs to surpass the $2,417-2,418 hurdle to attract meaningful buyers

From a technical perspective, this week's bounce from the $2,385 resistance breakpoint – now coinciding with the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50% retracement level of the June-July rally – warrants caution for bearish traders. The said area should now act as a key pivotal point, which if broken decisively should pave the way for deeper losses. The Gold price might then slide to 61.8% Fibo. level, around the $2,366-2,365 region, en route to the $2,352-2,350 zone before eventually dropping to 78.6% Fibo. level, near the $2,334-2,334 area, and the $2,300 mark.

On the flip side, any subsequent move up is likely to confront some resistance near the $2,417-2,418 zone, above which a fresh bout of a short-covering move could lift the Gold price to the $2,437-2,438 region. Some follow-through buying beyond the latter will suggest that the recent downfall witnessed over the past week or so has run its course and shift the near-term bias back in favor of bullish traders. The momentum could then extend back towards retesting the all-time peak, around the $2,482 area touched on July 17, with some intermediate resistance near the $2,458 region.