Gold price regains positive traction, remains below two-week high on reviving Fed rate hike bets

• Gold attracts fresh buyers on Friday and stalls the overnight pullback from over a two-week high.
• Retreating US bond yields keeps the USD bulls on the defensive and lends support to the metal.
• The prospects for further policy tightening by the Fed could act as a headwind for the XAU/USD.

Gold price (XAU/USD) witnessed an intraday turnaround from the $1,885 region, or over a two-week high and settled near the lower end of its daily range on Thursday. Consumer prices in the United States (US) rose more than expected in September and lifted expectations that the Federal Reserve (Fed) will keep interest rates higher for longer. This led to the sharp overnight rise in the US Treasury bond yields and triggered a massive US Dollar (USD) short-covering rally, which, in turn, was seen as a key factor exerting pressure on the precious metal.

The downfall, however, lacks follow-through, with a modest downtick in the US Treasury bond yields and a softer USD assisting the Gold price to attract some dip-buying near the $1,868-1867 region during the Asian session on Friday. The recent dovish remarks by several Fed officials suggested that the US central bank is nearing the end of its rate-hiking cycle. This puts a lid on the US bond yields, removing some of the driving force behind a strong Greenback. Apart from this, geopolitical issues drive some haven flows to the non-yielding yellow metal.

Daily Digest Market Movers: Gold price is seen drawing support from a combination of factors

• Gold price stalls the previous day's post-US CPI retracement slide from over a two-week high amid retreating US Treasury bond yields and a softer US Dollar.
• The recent comments by several Federal Reserve officials raise the uncertainty over the US central bank’s near-term monetary policy outlook. 
• The latest US consumer inflation figures released on Thursday, however, kept the door open for at least one more 25 basis point (bps) lift-off by the end of this year.
• The headline US CPI rose 0.4% in September and the yearly rate held steady at 3.7% as compared to market expectations for a tick lower to 3.6%.
• The Core CPI, which excludes volatile food and energy prices, matched estimates and eased to the 4.1% YoY rate in September, hitting a 24-month low.
• The inflation is still above the Fed's 2% target and supports prospects for further policy tightening, warranting some caution for the XAU/USD bulls.
• Boston Fed President Susan Collins said that the central bank might have to raise rates again to combat inflation as the data underscored uneven progress toward restoring price stability.
• Military clashes between Israel and the Palestinian Islamist group, Hamas, might continue to underpin the safe-haven bullion and help limit the downside.
• Traders now look to Philadelphia Fed President Patrick Harker's speech and the Preliminary Michigan Consumer Sentiment Index for a fresh impetus.
• The precious metal remains on track to register strong weekly gains of more than 2%, the most since mid-March, snap a two-week losing streak.

Technical Analysis: Gold price remains well within the striking distance of over a two-week high

From a technical perspective, the emergence of fresh buying ahead of the $1,865 support zone favours bullish traders. That said, technical indicators on the daily chart are yet to confirm a positive bias. This, in turn, warrants some caution before positioning for any further appreciating move. Hence, any subsequent strength is more likely to confront resistance near the overnight swing high, around the $1,885 region. This is closely followed by the $1,900 mark, which if cleared will set the stage for additional gains.

On the flip side, the $1,868-1,865 region might continue to protect the immediate downside ahead of the $1,853-1,850 zone. A convincing break below could drag the Gold price to the $1,835-1,833 region, representing a multi-day-old trading range resistance breakpoint. Some follow-through selling might turn the XAU/USD vulnerable to slide back towards retesting the multi-month low, around the $1,810 zone touched last week.