Gold price (XAU/USD) dived to a one-and-half-week low on Wednesday in the wake of rising US Treasury bond yields and a stronger US Dollar (USD).

The US bond yields, however, started losing traction after minutes of the December 12-13 FOMC meeting reflected a consensus among policymakers that inflation is under control and concerns about the downside risks to the economy associated with an overly restrictive stance. This, along with a softer risk tone, allowed the precious metal to attract some buyers near the $2,030 area and gains some follow-through traction on Thursday.

The markets, however, remain uncertaint over the timing of when the Fed will start cutting interest rates. Moreover, Richmond Fed President Thomas Barkin' said on Wednesday that interest rate hikes remain on the table. This leads to a modest uptick in the US Treasury bond yields, which is seen acting as a tailwind for the USD and keeping a lid on any further gains for the non-yielding Gold price. Traders also seem reluctant to place aggressive directional bets and are seeking more clarity on the Fed's policy outlook. Hence, the focus remains on the release of the US Nonfarm Payrolls (NFP) on Friday.

In the meantime, Thursday's US economic docket, featuring the ADP report on private-sector employment and the usual Initial Jobless Claims, will be looked upon for short-term trading opportunities later during the early North American session. Nevertheless, the aforementioned mixed fundamental backdrop warrants some caution before placing fresh dierctional bets around the Gold price. Hence, strong follow-through buying is needed to confirm that a one-week-old downtrend has run its course and positioning for any further intraday appreciating move for the XAU/USD.

Daily Digest Market Movers: Gold price benefits from reviving safe-haven demand

• Bets that the Federal Reserve will cut rates in March, along with geopolitical tensions, help the Gold price to build on the overnight bounce from over a one-week low.
• The December FOMC meeting minutes revealed that members generally viewed the addition of 'any' to the statement as an indication that policy rates are likely near peak.
• Policymakers observed progress on inflation, though noted that circumstances might warrant keeping interest rates at the current level longer than they currently anticipate.
• Moreover, the minutes did not provide direct clues about the timing of when a series of interest rate cuts in 2024 might commence.
• Richmond Fed President Thomas Barkin on Wednesday expressed confidence that the economy is on its way to a soft landing and said that rate hikes remain on the table.
• The yield on the benchmark 10-year US government bond holds steady below 4.0%, which should act as a tailwind for the US Dollar and cap the non-yielding yellow metal.
• The Institute for Supply Management (ISM) said on Wednesday that the pace of decline in the US manufacturing sector slowed amid a modest rebound in production.
• The US ISM Manufacturing PMI improved to 47.4 last month from 46.7 in November, though remained in contraction territory for the 14th consecutive month.
• The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed that employment listings fell to 8.79 million in November – the lowest since March 2021.
• Traders now look to the US ADP report, which is expected to show that private-sector employers added 115K jobs in December as compared to the 103K in the previous month.

The market focus, however, will remain glued to the official monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report on Friday.

Technical Analysis: Gold price flirts with the $2,048-2,050 support-turned-resistance

From a technical perspective, the overnight breakdown and acceptance below the $2,050-$2,048 resistance-turned-support favours bearish traders. That said, oscillators on the daily chart are still holding in the positive territory and warrant some caution. Hence, it will be prudent to wait for some follow-through selling below the overnight swing low, around the $2,030 area before positioning for any further depreciating move.

The Gold price might then accelerate the slide towards the 50-day Simple Moving Average (SMA), currently around the $2,012-2,011 area, en route to the $2,000 psychological mark. A sustained break below the latter might shift the near-term bias in favour of bearish traders.

On the flip side, momentum back above the $2,050 region now seems to confront stiff resistance near the $2,064-2,065 area. The next relevant hurdle is pegged near the $2,077 horizontal zone, which if cleared decisively should allow the Gold price to aim back towards reclaiming the $2,100 mark.

Source: FX Street

BDST: 1426 HRS, JAN 04, 2024
MN