Gold price refreshes weekly high on dovish Fed bets, risk-on mood could cap further gains

• Gold price gains some positive traction for the third straight day and climbs to a one-week high on Wednesday.
• The USD languishes near its lowest level in more than two months amid bets that the Fed is done raising rates. 
• The prevalent risk-on mood might hold back bulls from placing fresh bets and cap the upside for the XAU/USD.

Gold price (XAU/USD) scales higher for the third successive day on Wednesday and touches a fresh weekly high, around the $1,971 region during the early part of the European session. The momentum remains well supported by the prevalent US Dollar (USD) selling bias, fueled by firming expectations that the Federal Reserve (Fed) is done raising interest rates, which, in turn, is seen benefitting the non-yielding yellow metal.

That said, the prevalent risk-on environment, bolstered by dovish Fed expectations and a massive liquidity injection by China’s central bank, could act as a headwind for the safe-haven Gold price and cap any further gains. Moreover, signs that tensions in the Middle East could be easing warrant caution before positioning for an extension of this week's recovery from the lowest level since October 18, around the $1,930 area touched on Monday.

Daily Digest Market Movers: Gold price remains supported by expectations that the Fed will not raise rates again

• The US Bureau of Labor Statistics (BLS) reported on Tuesday that the headline CPI was unchanged in October, while the yearly rate registered its smallest rise in two years and decelerated to 3.2% from 3.7% in September.
• The data reaffirms expectations that the Federal Reserve (Fed) has ended its policy tightening cycle and lifts bets for a rate cut in May 2024, which, in turn, triggered the overnight steep decline in the US Treasury bond yields.
• The yield on the benchmark 10-year US government bond languishes near a two-month low, keeping the US Dollar depressed near its lowest level since September 1 and lending some support to the non-yielding Gold price.
• The prevalent risk-on mood is seen acting as a headwind for the safe-haven precious metal, though the fundamental backdrop favours bullish traders and suggests that the path of least resistance remains to the upside.
• Dovish Fed expectations, along with a 600 billion Yuan liquidity injection by the People’s Bank of China, aimed at shoring up sluggish economic growth and encouraging more lending in the country, boosts investors' confidence.
• China's Industrial Production grew by 4.6% YoY in October, better than the 4.5% rise in the previous month and consensus estimates, and the monthly Retail Sales advanced more than expected, by 7.4% over the past 12 months.
• China's Fixed Asset Investment climbed by 2.9% YoY during the reported month as compared to the 3.1% anticipated and September reading. The data does little to influence the market sentiment or provide any impetus.
• Market participants now look to the release of the US Producer Price Index (PPI) and monthly Retail Sales figures for short-term opportunities later during the early North American session this Wednesday.
• The headline US PPI is anticipated to have risen by 0.1% in October, down from 0.5% in the previous month, and the yearly rate is seen falling below the 2.0% mark, though the core PPI is expected to match September's readings.
• The US Retail Sales possibly contracted by 0.3% in October, down sharply from the 0.7% rise registered in the previous month, while sales excluding automobiles are expected to remain flat MoM.

Technical Analysis: Gold price touches a fresh weekly top; seems poised to  extend its appreciating move

From a technical perspective, any subsequent move beyond the overnight swing high, around the $1,970-1,971 area, is likely to confront some resistance near the $1,980 region. Some follow-through buying has the potential to lift the Gold price towards the $1,991-1,992 hurdle en route to the $2,000 psychological mark and a multi-month peak, around the $2,009-2,010 region. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move.

On the flip side, a corrective pullback might now attract some buyers and remain limited near the $1,950-1,949 area. This is followed by a cluster of supports near the 200-day SMA, currently pegged around the $1,935 region, and the 100- and the 50-day SMAs confluence near the $1,928-1,925 zone. Failure to defend the said support levels would make the Gold price vulnerable to accelerate the fall towards the $1,900 round figure.