Gold Price Trades With Positive Bias Around $2,375 Area, Focus Remains Glued To US CPI

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  • Gold price ticks higher for the third straight day on Thursday, albeit lacking bullish conviction.
  • Fed rate cut bets keep the USD bulls on the defensive and continue to lend some support.
  • The risk-on mood caps the upside as traders keenly await the release of the US CPI report.

Gold price (XAU/USD) attracts some buyers for the third successive day on Thursday, albeit it lacks follow-through and trades below the weekly top during the Asian session. Traders now seem reluctant and prefer to wait for the release of the latest consumer inflation figures from the United States (US) before positioning for a firm near-term direction. The key US CPI report will be looked upon for more cues on interest rate cuts by the Federal Reserve (Fed), which, in turn, should drive the US Dollar (USD) demand and provide some meaningful impetus to the non-yielding yellow metal.

Heading into the key data risk, comments from Fed Chair Jerome Powell reaffirmed market expectations that the central bank will lower borrowing costs in September and again in December. This keeps the USD bulls on the defensive and continues to act as a tailwind for the Gold price. Apart from this, sustained central bank buying, macroeconomic uncertainties, and geopolitical risks lend support to the XAU/USD. That said, the prevalent risk-on environment is holding back bullish traders from placing fresh bets and capping any further gains for the safe-haven precious metal. 

Daily Digest Market Movers: Gold price continues to draw support from rising Fed rate cut bets

  • Firming acceptance that the Federal Reserve (Fed) will begin its rate-cutting cycle in September and lower borrowing costs again in December continues to undermine the US Dollar, lending some support to the Gold price. 
  • The bets were lifted by Fed Chair Jerome Powell's comments, saying that the US remained on a path back to stable prices and that the central bank will consider neutral rates later in 2024 once inflation makes more progress.
  • Powell acknowledged some cooling in the US economy, though he said that he continues to see a soft landing, boosting investors' appetite for riskier assets, which, in turn, is seen capping the upside for the safe-haven XAU/USD.
  • Powell also reiterated that the Fed remained committed to its 2% inflation target, making the release of the latest US consumer inflation more relevant and holding back traders from placing fresh bullish bets around the metal.
  • The headline CPI is estimated to have risen by 0.1% in June and the yearly rate decelerated from 3.3% to 3.1%, while the Core CPI (excluding Food and Energy prices) is expected to remain sticky and come in at a 3.4% YoY rate.
  • The crucial inflation data will set the stage for the Fed's rate-cut path, which, in turn, should influence the USD price dynamics and help in determining the next leg of a directional move for the non-yielding yellow metal.

Technical Analysis: Gold price could aim to reclaim the $2,400 mark and retest the all-time peak

From a technical perspective, last week's sustained breakout through the 50-day Simple Moving Average (SMA) and a subsequent move beyond the $2,365 supply zone was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and suggest that the path of least resistance for the Gold price is to the upside. This, in turn, supports prospects for some follow-through strength towards reclaiming the $2,400 mark with some intermediate hurdle near the overnight swing high, around the $2,386-2,387 zone, and the $2,393 area, over a one-month top touched last week.

On the flip side, any corrective slide is likely to find some support near the $2,360-2,358 region ahead of the 50-day SMA, currently pegged near the $2,345 area. A convincing break below the latter has the potential to drag the Gold price to the $2,319-2,318 support en route to the $2,300 mark and the $2,285 horizontal zone. The latter now coincides with the 100-day SMA, which, if broken, decisively might shift the near-term bias in favor of bearish traders. The XAU/USD might then slide to the $2,258 intermediate support before dropping to the $2,225-2,220 area and the $2,200 round-figure mark.

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