• Gold price remains well supported by bets for an imminent Fed rate cut later this year.
• The prevalent risk-on environment keeps a lid on any further gains for the XAU/USD.
• Thursday’s sustained breakout through the $2,040-2,042 hurdle favors bullish traders.

During the Asian session on Friday, the price of gold (XAU/USD) stayed stable at $2,045 and is still quite close to the nearly one-month top that was set the day before. The US Federal Reserve (Fed) may eventually lower interest rates as the Personal Consumption Expenditures (PCE) Price Index, which was issued on Thursday, revealed that annual inflation in January was the lowest in three years. This turns out to be a crucial component operating as a tailwind for the precious metal, failing to help the US Dollar (USD) build on the robust recovery from a theoretically critical 200-day SMA that occurred overnight.

Nevertheless, many significant FOMC members’ remarks imply that the US central bank was not in a rush to lower interest rates. Investors also appear to be adamant that the Fed will reduce borrowing costs in the June policy meeting. Thus, the upside potential of the price of non-yielding gold is limited, and elevated US Treasury bond rates continue to be supported. In addition, traders are believed to be deterred from making new optimistic wagers on the safe-haven XAU/USD due to the overall strong positive sentiment observed in the global equities markets. This suggests that prudence should be exercised before positioning for further gains.

Daily Digest Market Movers: Gold price lacks follow-through buying amid Fed’s hawkish outlook

• The US inflation report met market forecasts, indicating that the Federal Reserve will continue to lower interest rates later this year, which will help to sustain the price of gold.
• The Fed’s preferred measure of inflation, the Core US PCE Price Index, which does not include energy and food costs, increased by 0.4% in January. The annual rate decreased to 2.4% from 2.6% the month before.
• Markets are still pricing in the potential of the first interest rate decrease in June, according to the CME Group’s FedWatch Tool, and remarks made by many Fed officials reinforced these bets.
• According to Atlanta Fed President Raphael Bostic, the US central bank will probably decide to start lowering interest rates in the summer due to the pace at which US inflation is decreasing.
• Although she noted that given the strength of the US economy, central bank authorities are prepared to cut interest rates as needed, San Francisco Fed President Mary Daly stressed that this is not an urgent need.
• Although recent inflation data indicates that policymakers need to do more to reduce price pressures, Cleveland Fed President Loretta Mester maintained her support for three rate cuts this year.
• Although he acknowledged that there is no pressing need to do so, New York Fed President John Williams restated that the US central bank’s next course of action is probably to decrease interest rates to their target level.
• The risk-on rise in the global equities markets and the proximity of the US Treasury bond yields to their recent highs prevent additional advances in the safe-haven XAU/USD.

Technical analysis: Gold price bulls might aim to test the next relevant hurdle near the $2,065 area

Technically speaking, bullish traders saw the overnight breakout through the $2,040-2,042 horizontal resistance as a new trigger. Additionally, oscillators on the daily chart are beginning to show promise for a continuation of the current, somewhat favorable bounce from the YTD low, which was struck in the $1,984 range in February. Therefore, a bounce to the next significant resistance level around $2,065 on the way to the $2,100 round number appears likely.

Conversely, weakness back below the resistance-turned-support zone of $2,040-2,042 may now be viewed as a buying opportunity and is more likely to find good support close to the weekly low, or $2,025-2,024 region. The 100-day Simple Moving Average (SMA), which is currently in the $2,014 range, comes next. The $2,000 psychological barrier is next, and if it is breached, it could tip the scales in favor of bearish traders in the short term and push the price of gold down to the $1,984 support level, which is close to the crucial 200-day SMA, which is located in the $1,969–1,968 range.

US Dollar price today

The US dollar’s (USD) percentage change compared to a list of major currencies is displayed in the table below. The US dollar outperformed the Japanese yen in this exchange.

Conclusion

Price stability in gold can be an invaluable indicator for investors looking to secure their portfolios in the face of market volatility. By staying attuned to the economic, geopolitical, and market factors that influence gold prices, investors can make educated decisions that align with their investment goals and risk tolerance levels. For modern-day alchemists looking to turn the uncertainties of the market into a stable asset, understanding the subtle strengths of gold is critical.