Gold price sticks to modest intraday gains amid geopolitical risks, lacks bullish conviction

• Gold price gains positive traction for the second successive day, though the upside seems limited.
• Escalating geopolitical tensions seems 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 cap further gains.

Gold price (XAU/USD) builds on the previous day's recovery from the vicinity of the $2,000 psychological mark or its lowest level since December 13 and gains positive traction for the second straight day on Friday. A further escalation of military action in the Middle East, along with worries about sustained economic weakness in China, turn out to be key factors lending support to the safe-haven precious metal. 

Meanwhile, the US macro data released this week suggested that the economy is in good shape and forced investors to pare their bets for an early interest rate cut by the Federal Reserve (Fed). This leads to a further rise in the US Treasury bond yields, which allows the US Dollar (USD) to stand tall near a one-month top, which, along with a positive risk tone, should act as a headwind for the non-yielding Gold price. 

Traders now look to the US macro data – the Preliminary Michigan Consumer Sentiment and Inflation Expectations, along with Existing Home Sales. Apart from this, speeches by influential FOMC members and the US bond yields, will drive the USD and provide some impetus to the Gold price. Nevertheless, the XAU/USD remains on track to end the week in the red and the fundamental backdrop warrants caution for bulls. 

Daily Digest Market Movers: Gold price attracts haven flows amid Middle East tensions, upside seems limited

• 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 remains below $2,040-2,042 pivotal resistance, bearish potential seems intact

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.