Image Source: Pixabay

• Gold price retreats from over a two-week top as bulls turn cautious ahead of the US CPI report.
• Bets for a less dovish Fed, rising US bond yields underpin the USD and weigh on the commodity.
• Geopolitical risks, trade war fears and rate-cut bets should help limit losses for the XAU/USD. 

Gold price (XAU/USD) struggles to capitalize on its intraday gains to levels beyond the $2,700 mark and retreats sharply from over a two-week high touched during the Asian session on Wednesday. This marks the first day of a negative move in the previous three and could be attributed to some repositioning trade ahead of the US consumer inflation figures. The crucial US Consumer Price Index (CPI) report will guide Federal Reserve (Fed) policymakers on their decision next week, which, in turn, will influence the US Dollar (USD) and provide a fresh impetus to the non-yielding yellow metal.

Heading into the key data risk, some follow-through recovery in the US Treasury bond yields assists the USD in preserving its gains registered over the past three days and exerts some pressure on the Gold price. That said, geopolitical risks stemming from the worsening Russia-Ukraine war and tensions in the Middle East, along with concerns over US President-elect Donald Trump's tariff plans, might continue to offer some support to the safe-haven XAU/USD. Moreover, the expected rate cuts by major central banks should limit losses for the commodity and warrant caution for bearish traders. 

Gold price bulls opt to lighten their bets amid a further recovery in US bond yields, ahead of US CPI report
 

• Israel launched airstrikes at military targets across Syria and deployed ground troops beyond a demilitarized buffer zone for the first time in 50 years following the collapse of President Bashar al-Assad's regime over the weekend. 
• Ukraine's President Volodymyr Zelenskyy issued orders to increase funding for equipping brigades with new drones and raised the idea of foreign troops being deployed in Ukraine until it could join the NATO military alliance.
• US President-elect Donald Trump has pledged to impose big tariffs against America’s three largest trading partners – Mexico, Canada and China – and also threatened a 100% tariff on the so-called 'BRICS' nations.
• The Bank of Canada is expected to cut rates later today, while the European Central Bank and the Swiss National Bank are likely to follow suit on Thursday, which should continue to support the non-yielding Gold price.
• According to the CME Group's FedWatch Tool, the markets are currently pricing in over an 85% probability that the Federal Reserve will lower borrowing costs by 25 basis points at its December policy meeting. 
• However, the recent hawkish remarks from several influential FOMC members, including Fed Chair Jerome Powell, suggested that the US central bank might adopt a more cautious stance on cutting interest rates. 
• Expectations for a less dovish Fed assisted the US Treasury bond yields to finish higher for the second day on Tuesday and lifted the US Dollar to a four-day high, albeit did little to dent the bullish sentiment around the precious metal. 
• The market focus remains glued to the crucial US Consumer Price Index (CPI) report, which might offer cues about the interest rate outlook in the US and provide a fresh impetus to the non-yielding XAU/USD. 
• The headline US CPI is expected to increase by 0.3% in November and rise by 2.7% on a yearly basis. Meanwhile, the core gauge (excluding food and energy prices) is forecast to remain unchanged at the 3.3% YoY rate.

Gold price corrective slide could be seen as buying opportunity near the $2,655-2,655 resistance breakpoint
 

From a technical perspective, this week's breakout through the $2,650-2,655 supply zone and the subsequent move up favors bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and are still far from being in the overbought territory. This, in turn, validates the near-term positive outlook for the Gold price and supports prospects for the emergence of some dip-buying near the aforementioned resistance breakpoint. This should help limit the downside for the XAU/USD near the $2,630 area, below which the downward trajectory could extend further towards the $2,600 round figure.

On the flip side, a sustained move beyond the $2,700 round figure could extend further towards the $2,720-2,722 hurdle. This is followed by resistance near the $2,735 region, which if cleared will suggest that the recent corrective decline from the all-time high touched in October has run its course and shift the bias in favor of bullish traders. The momentum might then lift the Gold price to the $2,758-2,760 barrier en route to the $2,770-2,772 region and the $2,790 area, or the record peak.

More By This Author: