Gold price remains on the defensive amid the post-FOMC USD recovery from YTD low

FXStreet
Updated
Mitrade
coverImg
Source: Shutterstock

  • Gold price struggles to lure buyers despite the Fed’s jumbo interest rate cut on Wednesday.

  • A further recovery in the US bond yields underpins the USD and caps the non-yielding metal.

  • Concerns about an economic slowdown, along with geopolitical risks, help limit the downside.


Gold price (XAU/USD) witnessed an intraday turnaround after hitting a new record high, around the $2,600 mark and settled in the red for the second straight day on Wednesday. The initial spike in the commodity followed the US Federal Reserve's (Fed) decision to kick-start the policy-easing cycle with an oversized rate cut. The rally, however, ran out of steam after Fed Chair Jerome Powell cooled hopes for a string of 50 basis point rate cuts ahead, which triggered a sharp US Dollar (USD) recovery from a 14-month low and weighed on the non-yielding yellow metal. 


Gold price subsequently dropped to a four-day low, though a combination of factors helped limit further losses. Investors remain concerned about an economic slowdown in the United States (US) and China – the world's two largest economies. This, along with persistent geopolitical risks stemming from the ongoing conflicts in the Middle East, offers some support to the safe-haven precious metal. That said, some follow-through USD buying failed to assist the commodity in registering any meaningful recovery and remained depressed during the Asian session on Thursday. 


Daily Digest Market Movers: Gold price is undermined by rising US bond yields and a modest USD strength; downside seems limited


Gold prices faded from the post-FOMC spike to a fresh record high and dived to a multi-day low on Wednesday amid a goodish US Dollar recovery from its lowest level since July 2023.


The Federal Reserve lowered its benchmark interest rate by 50 basis points to the 4.75%-5% range and forecast rates falling by another half of a percentage point by the end of this year. 


In the so-called dot plot, Fed members projected rates falling to 3.4% in 2025, down from a prior forecast of 4.1%, and declining to 2.9% in 2026, down from a prior forecast of 3.1%.


The new economic projections revealed that the Fed doesn't see inflation returning to the 2% target before 2026, raising questions about the magnitude of interest rate cuts going forward. 


Meanwhile, Fed Chair Jerome Powell, during the post-meeting press conference, downplayed concerns about a recession amid cooling inflationary pressures and a very solid labor market.  


This, in turn, triggered a sharp rise in the US Treasury bond yields, which extends through the Asian session on Thursday and assists the Greenback to build on its recovery momentum. 


Iran-backed Hezbollah said it attacked Israeli artillery positions with rockets on Wednesday in retaliation to blasts in Lebanon, which killed 20 people and injured more than 450.


Israel’s Defence Minister Yoav Gallant declared the start of a new phase in the war, raising the risk of a wider Middle East conflict, which could benefit the safe-haven XAU/USD. 


Technical Outlook: Gold price could extend the corrective slide once the $2,532-2,530 immediate support is broken decisively


From a technical perspective, any subsequent slide is more likely to find decent support near the previous cycle high, around the $2,532-2,530 area. Some follow-through selling will expose the next relevant support near the $2,517-2,515 area, below which the Gold price could accelerate the corrective decline to the $2,500 psychological mark. The downward trajectory could extend further towards the $2,470 confluence – comprising the 50-day Simple Moving Average (SMA) and the lower boundary of a short-term ascending channel. The latter should act as a key pivotal point, which if broken decisively might shift the near-term bias in favor of bearish traders. 


On the flip side, the $2,577-2,578 region now seems to act as an immediate hurdle ahead of the $2,600 mark, or the all-time peak touched on Wednesday. The subsequent move up could allow the Gold price to challenge the trend-channel resistance, currently pegged near the $2,610-2,612 region. A convincing breakout through the said barrier will be seen as a fresh trigger and set the stage for an extension of the recent well-established uptrend witnessed over the past three months or so.

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

goTop
quote
Do you find this article useful?
Related Articles
placeholder
Forex Today: US Dollar consolidates weekly gains as focus shifts to US confidence dataThe action in financial markets remain relatively subdued early Friday and the US Dollar (USD) Index consolidates its weekly gains at around 98.50.
Author  FXStreet
15 hours ago
The action in financial markets remain relatively subdued early Friday and the US Dollar (USD) Index consolidates its weekly gains at around 98.50.
placeholder
Gold price extends range play amid mixed Fed rate cut cues; downside seems limitedGold 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.
Author  FXStreet
17 hours ago
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.
placeholder
Oil prices rise as demand increases, while gold falls on stronger dollarOil prices climbed on Thursday early trade, reversing losses from the previous session after data showed stronger demand in top consuming nations.
Author  Cryptopolitan
Yesterday 09: 55
Oil prices climbed on Thursday early trade, reversing losses from the previous session after data showed stronger demand in top consuming nations.
placeholder
Gold price retreats further from multi-week high touched on WednesdayGold price (XAU/USD) drifts lower during the Asian session on Thursday and moves further away from a three-week top, around the $3,377 area touched the previous day.
Author  FXStreet
Yesterday 05: 47
Gold price (XAU/USD) drifts lower during the Asian session on Thursday and moves further away from a three-week top, around the $3,377 area touched the previous day.
placeholder
Gold price advances to $3,335 area; lacks bullish conviction amid reduced Fed rate cut betsGold price (XAU/USD) edges higher during the Asian session on Wednesday and reverses a part of the overnight downfall to a multi-day low, though it lacks follow-through buying.
Author  FXStreet
Jul 16, Wed
Gold price (XAU/USD) edges higher during the Asian session on Wednesday and reverses a part of the overnight downfall to a multi-day low, though it lacks follow-through buying.