Gold holds steady below record high as traders await more cues on Fed’s rate-cut path

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• Gold price struggles to capitalize on the overnight gains and oscillates in a range on Thursday.
• The uncertainty over the Fed’s rate-cut path is seen as a key factor capping the precious metal.
• Subdued USD demand and geopolitical tensions continue to act as a tailwind for the XAU/USD.

Gold price (XAU/USD) regained positive traction on Wednesday and reversed a major part of the previous day’s corrective fall from the vicinity of a record peak touched last week. Despite a hot US inflation print, investors still expect the Federal Reserve (Fed) to start cutting interest rates at the June policy meeting. This, in turn, prompted some US Dollar (USD) selling, which, along with escalating geopolitical tensions, provided a goodish lift to the safe-haven precious metal.

The downside for the USD, however, remains limited as investors seek more clarity about the Fed’s rate-cut path before placing fresh directional bets. This, in turn, keeps the US Treasury bond yields elevated and fails to assist the non-yielding Gold price to capitalize on the overnight positive move, leading to a subdued range-bound price action during the Asian session on Thursday. This, in turn, warrants some caution before positioning for the resumption of the recent uptrend.

Traders also seem reluctant and might prefer to wait on the sidelines ahead of the two-day FOMC monetary policy meeting starting next Tuesday. In the meantime, Thursday’s US macro data – monthly Retail Sales, the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims – might influence the USD price dynamics. This, along with the US bond yields and the broader risk sentiment, might contribute to producing short-term trading opportunities around the Gold price.

Daily Digest Market Movers: Gold price is underpinned by June Fed rate cut bets, geopolitical risks

• Hopes of an interest rate cut by the Federal Reserve at the June policy meeting keep the US Dollar bulls on the defensive and continue to act as a tailwind for the non-yielding Gold price amid geopolitical risks.
• The US CPI report released on Tuesday indicated some stickiness in inflation, which might force the Fed to stick to its higher-for-longer narrative and hold back the XAU/USD bulls from placing fresh bets.
• Investors remain concerned about geopolitical risks stemming from the prolonged Russia-Ukraine war, and the Israel-Hamas conflict, which further seems to benefit the precious metal’s safe-haven status.
• Russian President Vladimir Putin said on Wednesday that it would be considered a significant escalation of the conflict if the US sent troops to Ukraine and that Moscow was ready for a nuclear war.
• An Israeli attack hit a UN aid distribution centre in Rafah, while Lebanon’s Hezbollah said two of its fighters were killed in the Bekaa Valley after Israel launched a strike on the area for a second straight day.
• A report from US news site Politico noted that senior US officials have told their Israeli counterparts that the Biden administration will support the targeting of high-value Hamas targets in and underneath Rafah.
• The uncertainty over the Fed’s rate-cut path keeps the US Treasury bond yields elevated, which helps limit any meaningful USD fall and should cap any meaningful appreciating move for the precious metal.
• Traders now look to Thursday’s US macro data – monthly Retail Sales, the Producer Price Index and Weekly Jobless Claims – for some impetus, though the focus remains on next week’s FOMC policy meeting.

Technical Analysis: Gold price needs to move beyond the record high for bulls to regain control

From a technical perspective, any subsequent move up is more likely to confront some resistance near the $2,195 region, or the record peak touched last Friday. Some follow-through buying beyond the $2,200 mark will push the Gold price to uncharted territory and be seen as a fresh trigger for bulls, setting the stage for an extension of the recent blowout rally witnessed over the past two weeks or so.

On the flip side, the $2,155-2,150 area now seems to protect the immediate downside, below which the Gold price could slide to the next relevant support near the $2,128-2,127 zone. The corrective decline could extend further towards the $2,100 round figure, which should act as a strong base for the XAU/USD. A convincing break below might prompt some technical selling and pave the way for deeper losses.