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• The price of gold surged on Friday, buoyed by a decline in US Treasury yields and optimistic market conditions.
• A risk-on mood prevailed, yet gold still managed to attract investors, defying typical safe-haven asset trends.
• Market sentiment seemed to adjust to the Fed's cautious stance, with expectations of significant rate easing to be seen by year-end.

The price of gold resumed its weekly uptrend on Friday, and it appeared set to finish the week in the green, taking advantage of the fall in US Treasury bond yields amid quiet news flows. Federal Reserve officials continued to cross the wires, led by New York Fed President John Williams, who aligned with his colleagues' recent comments. The XAU/USD cross was seen exchanging hands at around $2,038, up approximately 0.70%.

The financial markets have been in a risk-on mode, which usually translates to “less” appetite for safe-haven assets. However, this was not the case for Friday's trading, as gold remained underpinned by dropping US Treasury yields.

The 10-year benchmark note erased most of its gains, falling three and a half basis points, down to 4.248%. Despite Fed officials delivering a “slightly” hawkish tone recently, this was well received by investors who trimmed bets on Fed interest rate cuts and expect to see 93 basis points of easing toward the year’s end.

Market Movers: Gold's Advance Prompted by Soft US Dollar Undermined by Lower US Yields

• The Federal Open Market Committee (FOMC) minutes for January showed that policymakers remain hesitant to cut rates, adopting a cautious approach amid the latest resurgence of inflationary measures. Although acknowledging that the risks of achieving both mandates are more balanced, they would remain “highly attentive” to inflation. This is at the expense of economic risks being tilted to the downside.
• Besides that, the US labor market remains strong after the latest Initial Jobless Claims data saw fewer Americans applying for unemployment benefits.
• US business activity moderated in February, as revealed by S&P Global. The Services and Composite Indices expanded below the previous month’s reading, though Manufacturing surprisingly jumped, exiting contractionary territory.
• The CME FedWatch Tool sees traders expect the first 25 bps rate cut by the Fed in June 2024.
• Investors are pricing in 95 basis points of easing throughout 2024.
• The US Dollar Index, tracking the performance of the US dollar against a basket of six major currencies, was seen trading near 103.90, down 0.04%.
• As mentioned, John Williams said the Fed is on track to cut interest rates “later this year.” He noted that the progress of inflation toward the central bank's 2% target would be “bumpy,” but overall, the economy is headed “in the right direction.”

Technical Analysis: Gold Surpassed the 50-Day SMA, Eyed $2,050

Gold appeared to shift to a neutral-upwards bias as it hurdled the 50-day Simple Moving Average (SMA) at $2,033.75, opening the door to challenge the $2,050 figure. Once those levels are cleared, up next would be the Feb. 1 high at $2,065.60, ahead of the Dec. 28 high at $2,088.48.

On the flip side, sellers dragging the XAU/USD spot price below the 50-day SMA could pave the way to test the Oct. 27 daily high-turned-support at $2,009.42.  A breach of the latter would expose the 100-day SMA at $2,002.05. The next stop would be the Dec. 13 low at $1,973.13, followed by the 200-day SMA at $1,965.86.

XAU/USD Price Action - Daily Chart

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