Gold bulls keenly await US PCE Price Index on Friday before placing fresh bets

Gold price lacks any firm intraday direction and oscillates in a narrow trading range.
The overnight hawkish remarks by Fed’s Waller act as a headwind for the XAU/USD.
The downside seems limited as traders await more cues about the Fed’s rate-cut path.

Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session. Traders now seem reluctant and prefer to wait for more cues about the Federal Reserve's (Fed) rate-cut path before placing fresh directional bets around the non-yielding yellow metal. Hence, the focus remains glued to the release of the US Personal Consumption Expenditures (PCE) Price Index, or the Fed's preferred inflation gauge on Friday.

In the meantime, a combination of diverging forces fails to provide any meaningful impetus to the Gold price and leads to subdued range-bound price action. Fed Governor Christopher Waller's hawkish remarks on Wednesday cooled rate cut hopes and assisted the US Dollar (USD) to stand tall near the monthly peak, which, in turn, acts as a headwind for the XAU/USD. The Fed, however, indicated that it remains on track to cut rates by 75 bps in 2024. This, along with a softer risk tone, is seen lending some support to the safe-haven metal.

Daily Digest Market Movers: Gold price extends its range play as traders now await US PCE data on Friday

Federal Reserve (Fed) Governor Christopher Waller said on Wednesday that he was in no hurry to cut rates in the wake of hotter inflation readings in recent months, boosting the US Dollar and capping gains for the Gold price.
Waller, however, noted that further expected progress on lowering inflation will make it appropriate for the Fed to start cutting interest rates later this year, which is seen acting as a tailwind for the non-yielding yellow metal.
Moreover, the Fed last week projected three interest rate cuts of 25 basis points each by the end of this year, and the markets are currently pricing in a greater chance of the first move at the June FOMC monetary policy meeting.
Apart from this, geopolitical risks stemming from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East should help limit any meaningful corrective decline for the safe-haven precious metal.
Traders now look to Thursday's US economic docket – featuring the release of the final Q4 GDP print, the usual Weekly Initial Jobless Claims, Pending Home Sales and the revised Michigan Consumer Sentiment Index.

Technical Analysis: Gold price needs to find acceptance above the $2,200 mark for bulls to regain contril

From a technical perspective, the range-bound price action witnessed over the past two weeks or so might be categorized as a bullish consolidation phase against the backdrop of a blowout rally since the beginning of this month. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and support prospects for an eventual breakout to the upside. Some follow-through buying back above the $2,200 mark will reaffirm the constructive setup and allow the Gold price to retest the record high, around the $2,223 region touched last week.

On the flip side, any corrective decline now seems to find some support near the overnight swing low, around the $2,173 area ahead of the $2,164-2,163 zone. This is followed by the lower end of the short-term trading range, around the $2,146-2,145 region, which, if broken, might prompt aggressive technical selling. The Gold price might then accelerate the fall to the next relevant support near the $2,128-2,127 region en route to the $2,100 round-figure mark. The latter should act as a strong base, which, if broken, will suggest that the XAU/USD has topped out in the near term.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

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