Gold price gains positive traction for the second straight day, though the upside seems limited.
Escalating geopolitical tensions seem to benefit the safe-haven XAU/USD and remain supportive.
Reduced bets for a March Fed rate cut push the US bond yields high and should caps further gains.
Gold price (XAU/USD) attracts some buyers for the second straight day on Friday and moves further away from its lowest level since Deceber 13 touched earlier this week. Geopolitical tensions in the Middle East escalated further after Pakistan launched retaliatory airstrikes inside Iran on Thursday. This comes on top of US-Houthi clashes in the Red Sea, which, along with worries about sustained economic weakness in China, turn out to be key factors benefitting the safe-haven precious metal.
Meanwhile, the US Dollar (USD) extends its sideways consolidative price move below a one-month peak set on Wednesday and lends additional support to the Gold price. That said, diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed) continue to push the US Treasury bond yields higher. This, in turn, acts as a tailwind for the Greenback. Apart from this, a generally positive tone around the equity markets might contribute to capping the upside for the XAU/USD.
Daily Digest Market Movers: Gold price benefits from geopolitical risks, Fed rate cut uncertainty warrants caution for bulls
The US-led forces continue to clash with the Iran-backed Houthi group in the Red Sea and seem to lend some support to the safe-haven Gold price amid a subdued US Dollar price action.
Houthi rebels in Yemen launched two anti-ship ballistic missiles at a US-owned, Greek-operated tanker ship on Thursday and the US, in response, carried out its fifth strike against Houthi targets.
Pakistan undertook a series of military strikes against terrorist hideouts in the Sistan-Baluchistan province of Iran, while the latter began a planned air defense drill from its port of Chabahar near Pakistan.
The USD consolidates below its highest level since December 13 touched earlier this week, though reduced bets for a March rate cut by the Federal Reserve continue to act as a tailwind.
The incoming resilient US macro data released this week suggested that the economy is in good shape and gives the central bank headroom to keep interest rates higher for longer.
Against the backdrop of the upbeat US Retail Sales figures on Wednesday, data released on Thursday showed that the Initial Jobless Claims fell to the lowest level since September 2022.
The markets were quick to react to the strong labor-market report and are now pricing just over a 50% chance of a rate cut at the March FOMC meeting, down from 75% a week ago.
The yield on the benchmark 10-year US government bond touched its highest level since mid-December, which favours the USD bulls and should cap gains for the non-yielding yellow metal.
Traders now look to the US macro data – the Preliminary Michigan Consumer Sentiment and Inflation Expectations, along with Existing Home Sales – for short-term opportunities.
Technical Analysis: Gold price is likely to confront stiff resistance and remain capped near the $2,040-2,042 supply zone
From a technical perspective, the lack of follow-through buying beyond the 50-day Simple Moving Average (SMA) suggests that the selling bias is still far from being over. Furthermore, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the Gold price is to the downside. Hence, any further move up might still be seen as an opportunity for bearish traders and runs the risk of fizzling out rather quickly near the $2,040-2,042 static resistance. Some follow-through buying, however, might trigger a short-covering rally and lift the XAU/USD towards the $2,077 area en route to the $2,100 psychological mark.
On the flip side, bearish traders might now wait for a sustained break below the $2,000 round figure before placing fresh bets. The Gold price might then accelerate the downfall towards the December monthly swing low, around the $1,974-1,973 region. The latter near the 100- and 200-day SMAs confluence, around the $1,971-1,963 area, which if broken decisively should pave the way for deeper losses towards the $1,955 intermediate support. The XAU/USD could eventually drop to the November swing low, around the $1,932-1,931 region.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.
USD EUR GBP CAD AUD JPY NZD CHF
USD -0.09% -0.02% 0.00% -0.02% 0.07% 0.25% 0.00%
EUR 0.09% 0.07% 0.08% 0.05% 0.16% 0.32% 0.09%
GBP 0.02% -0.06% 0.02% -0.01% 0.08% 0.28% 0.03%
CAD 0.00% -0.09% -0.02% -0.05% 0.07% 0.26% 0.00%
AUD 0.04% -0.03% 0.03% 0.04% 0.10% 0.29% 0.04%
JPY -0.07% -0.15% -0.08% -0.08% -0.10% 0.19% -0.07%
NZD -0.27% -0.36% -0.27% -0.28% -0.31% -0.19% -0.27%
CHF 0.00% -0.06% -0.02% 0.00% -0.07% 0.09% 0.23%
