Gold bulls await US macro data before positioning for further gains

Gold price attracts some dip-buying on Thursday after the overnight post-US CPI decline.
Persistent geopolitical risks and Fed rate cut bets continue to offer support to the metal.
A modest USD uptick and a positive risk tone could cap the upside for the XAU/USD.

Gold price (XAU/USD) registered losses on Wednesday as investors scaled back their expectations for more aggressive policy easing by the Federal Reserve (Fed) following the release of the US consumer inflation figures. That said, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East, along with growing acceptance for an imminent start of the Fed's rate-cutting cycle and subdued US Dollar (USD) price action, assist the metal to regain positive traction on Thursday.

Meanwhile, reduced bets for a 50 basis points (bps) Fed rate cut in September led to a modest recovery in the US Treasury bond yields and might hold back traders from placing aggressive bullish bets around the non-yielding Gold price. Apart from this, a generally positive tone around the equity markets could act as a headwind for the safe-haven precious metal. Nevertheless, the fundamental backdrop supports prospects for additional gains ahead of key US macro data later this Thursday.

Daily Digest Market Movers: Gold price draws support from geopolitical risk and subdued USD demand

Data published on Wednesday showed that US consumer prices rebounded as anticipated in July and dashed hopes for a bigger interest rate cut by the Federal Reserve in September.
In fact, the US Labor Department's Bureau of Labor Statistics (BLS) reported that the headline US CPI rose moderately, by 0.2% in July after falling 0.1% in the previous month.
The annual increase in the CPI, however, slowed a bit and fell below 3% for the first time in nearly 3-1/2 years, suggesting continued progress towards the Fed's inflation goals.
The core CPI, which excludes volatile food and energy prices, increased by 0.2% during the reported month and eased to 3.2% in the 12 months through July from 3.3% in June.
According to the CME Group's FedWatch Tool, investors now see a 36% chance of a 50-basis point rate cut at the next FOMC meeting versus the 50% prior to the US CPI data.
This triggered a late recovery in the US Treasury bond yields, which assisted the US Dollar in attracting some buyers at lower levels and weighed on the non-yielding yellow metal.
The USD Index (DXY) gains some follow-through traction on Thursday and acts as a headwind for the commodity, though elevated geopolitical tensions continue to offer some support.
Mediators are hoping to kick-start ceasefire negotiations between Israel and Hamas on Thursday amid the risk of an imminent Iranian attack on Israel within the next few days.
Traders now look to the US economic docket – featuring Retail Sales, Weekly Initial Jobless Claims and regional manufacturing indices – for short-term opportunities.

Technical Outlook: Gold price could accelerate the positive move once $2,470 horizontal barrier is cleared

From a technical perspective, the overnight swing low, around the $2,438 region, now seems to protect the immediate downside ahead of the $2,424 area, or the weekly trough touched on Monday. Some follow-through selling could make the Gold price vulnerable to weaken further below the $2,400 mark and test the 50-day Simple Moving Average (SMA) pivotal support, currently pegged near the $2,380 zone. A convincing break below the latter might expose the 100-day SMA, near the $2,360 region, which if broken decisively will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.

Meanwhile, oscillators on the daily chart are holding in positive territory and support prospects for additional near-term gains. That said, any further move up is more likely to confront some resistance near the $2,471-2,472 region ahead of the $2,483-$2,484 area or the all-time peak touched in July. A subsequent rise beyond the $2,500 psychological mark will confirm a breakout through a one-month-old broader trading range and set the stage for a further near-term appreciating move.

Economic Indicator

Retail Sales (MoM)

The Retail Sales data, released by the US Census Bureau on a monthly basis, measures the value in total receipts of retail and food stores in the United States. Monthly percent changes reflect the rate of changes in such sales. A stratified random sampling method is used to select approximately 4,800 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms across the country. The data is adjusted for seasonal variations as well as holiday and trading-day differences, but not for price changes. Retail Sales data is widely followed as an indicator of consumer spending, which is a major driver of the US economy. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Retail Sales data published by the US Census Bureau is a leading indicator that gives important information about consumer spending, which has a significant impact on the GDP. Although strong sales figures are likely to boost the USD, external factors, such as weather conditions, could distort the data and paint a misleading picture. In addition to the headline data, changes in the Retail Sales Control Group could trigger a market reaction as it is used to prepare the estimates of Personal Consumption Expenditures for most goods.

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