Gold price oscillates around 50-day SMA, seems vulnerable amid doubts over early Fed rate cut

• Gold price struggles to capitalize on the previous day’s recovery move from over a one-month trough.
• Reduced bets for a March Fed rate cut put upward pressure on the US bond yields and caps gains.
• Escalating geopolitical tensions underpin the safe-haven XAU/USD and should limit the downside.

Gold price (XAU/USD) oscillates in a narrow trading range during the Asian session on Friday and remains well within the striking distance of over a one-month trough, around the $2,000 psychological mark touched earlier this week. Geopolitical tensions in the Middle East escalated further after Pakistan launched retaliatory airstrikes inside Iran on Thursday. This comes on top of US-Houthi clashes in the Red Sea, which, along with persistent worries about sustained economic weakness in China, acts as a tailwind for the safe-haven precious metal.

Meanwhile, the US Dollar (USD) extends its sideways consolidative price move for the third successive day and turns out to be another factor lending support to the Gold price. That said, reduced bets for an early interest rate cut by the Federal Reserve (Fed) remain supportive of elevated US Treasury bond yields, which might continue to lend support to the USD and cap gains for the non-yielding yellow metal. This, in turn, warrants some caution for aggressive bullish traders and before positioning for any meaningful appreciating move for the XAU/USD.

Daily Digest Market Movers: Gold price struggles to attract buyers amid mixed fundamental cues

• The US-led forces continue to clash with the Iran-backed Houthi group in the Red Sea and seem to benefit the safe-haven Gold price amid a subdued range-bound price action around the US Dollar.
• 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 bears might wait for a break below $2,000 before placing fresh bets

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.