Gold price eases from one-month top, corrective decline is likely to remain limited

Gold price (XAU/USD) ticks lower following an intraday uptick back closer to a one-month top touched the previous day and slides closer to the $2,042-2,040 resistance break point during the early European session on Friday. Growing acceptance that the Federal Reserve (Fed) will wait until the June policy meeting before lowering borrowing costs remains supportive of elevated US Treasury bond yields. This, along with the prevalent risk-on environment, turns out to be a key factor exerting some downward pressure on the non-yielding yellow metal. 

The downside for the Gold price, meanwhile, seems cushioned in the wake of rising bets for an eventual rate cut by the Fed, bolstered by signs of easing inflation in the US. Nevertheless, the XAU/USD seems poised to post gains for the second straight week as investors look to key US macro data scheduled at the start of a new month, starting with the ISM Manufacturing PMI later today. Friday's US economic docket also features the revised Michigan Consumer Sentiment Index, which, along with Fed Speaks, should provide some impetus to the XAU/USD. 

Daily Digest Market Movers: Gold price loses traction amid elevated US bond yields and risk-on mood

• The US inflation data came in line with market expectations, suggesting that the Federal Reserve is going to stay on track to cut interest rates later this year and lending some support to the Gold price.
• The Core US PCE Price Index – the Fed's preferred inflation gauge that excludes food and energy prices – climbed 0.4% in January and the yearly rate eased to 2.4% from 2.6% in the previous month.
• Meanwhile, the CME Group's FedWatch Tool indicates that markets are still pricing in the possibility of the first interest rate cut in June and the bets were reaffirmed by comments by several Fed officials.
• Atlanta Fed President Raphael Bostic said that the speed at which US inflation is easing means it will likely be appropriate for the US central bank to start cutting interest rates during the summertime.
• San Francisco Fed President Mary Daly said central bank officials are ready to lower interest rates as needed but emphasized there is no urgent need to do so given the strength of the US economy.
• Cleveland Fed President Loretta Mester said the recent inflation data suggests that policymakers have more work to do to cool price pressures but didn't change her view for three rate cuts this year.
• New York Fed President John Williams reiterated that the next move for the US central bank is likely to be cut to its interest rate target, though noted there is no sense of urgency to do that.
• The US Treasury bond yields aren’t far from their recent highs, which, along with an extension of the risk-on rally across the global equity markets, keeps a lid on further gains for the safe-haven XAU/USD.

Technical analysis: Gold price bulls have the upper hand while above $2,040 resistance breakpoint

From a technical perspective, the overnight breakout through the $2,040-2,042 horizontal resistance was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and support prospects for an extension of the recent goodish rebound from the YTD low, around the $1,984 region touched in February. Hence, a subsequent strength towards the next relevant hurdle near the $2,065 region, en route to the $2,100 round figure, looks like a distinct possibility.

On the flip side, weakness back below the $2,040-2,042 resistance-turned-support might now be seen as a buying opportunity and is more likely to find decent support near the $2,025-2,024 area, or the weekly low. This is followed by the 100-day Simple Moving Average (SMA), currently near the $2,014 region. This is followed by the $2,000 psychological mark, which if broken might shift the near-term bias in favour of bearish traders and drag the Gold price to the $1,984 support en route to the very important 200-day SMA, near the $1,969-1,968 zone.