Gold price moves away from two-week high on renewed USD buying ahead of FOMC

• Gold price extends the overnight pullback from a two-week high amid a modest USD strength.
• Geopolitical risks and China’s economic woes could lend support to the safe-haven XAU/USD.
• Traders might also prefer to wait on the sidelines ahead of the crucial FOMC policy decision.

Gold price (XAU/USD) ticks lower during the Asian session on Wednesday and retreats further from a two-week high, around the $2,048-2,049 region touched the previous day. Investors continue to scale back their expectations on the speed and scale of interest rate cuts by the Federal Reserve (Fed) in the wake of strong US economic data. This assists the US Dollar (USD) to stand tall near its highest level since December 13 touched earlier this week, which, in turn, is seen as a key factor exerting pressure on the precious metal.

That said, the recent decline in the US Treasury bond yields might hold back the USD bulls from placing aggressive bets. This, along with concerns about geopolitical risks stemming from the Middle East conflict, might continue to act as a tailwind for the safe-haven Gold price. Investors might also prefer to move to the sidelines and look to the highly-anticipated FOMC monetary policy meeting before positioning for the next leg of a directional move for the non-yielding yellow metal. This, in turn, warrants caution for bearish traders.

Daily Digest Market Movers: Gold price is undermined by modest USD strength, downside seems limited ahead of FOMC

• The US Dollar regains positive traction amid diminishing odds for a more aggressive policy easing by the Federal Reserve and drags the Gold price away from a two-week high touched the previous day.
• The Job Openings and Labor Turnover Survey (JOLTS) report published by the Bureau of Labor Statistics showed that US job openings unexpectedly increased to 9.02 million in December.
• The Conference Board's US Consumer Confidence Index improved for the third consecutive month and jumped to its highest level since December 2021, to 114.8 in January from the 108.0 previous.
• Adding to this, the International Monetary Fund upgraded its forecast for the US economic growth to 2.1% for 2024, versus the 1.5% rise expected in October, and then ease to 1.7% in 2025.
• This suggested that the US economy is still in good shape for the Fed to start cutting interest rates in the first quarter, which, in turn, acts as a tailwind for the buck and weighs on the metal.
• The yield on the benchmark 10-year US government bond languishes near the 4.0% threshold, which, along with geopolitical risks and China's economic woes, lend support to the XAU/USD.
• China's National Bureau of Statistics reported that the official Manufacturing PMI improved slightly to 49.2 in January, though remained in contraction territory for the fourth straight month.
• This points to a weak domestic recovery and poor external demand, though, to a larger extent, was offset by a further rise in the Non-Manufacturing PMI to 50.7 in January from the 50.4 previous.
• Investors now look to the highly-anticipated FOMC policy decision for cues about the first interest rate cut, which, in turn, will provide a fresh directional impetus to the non-yielding yellow metal.
• Heading into the key central bank event risk, traders will confront the release of the ADP report on private-sector employment and Chicago PMI later during the North American session.

Technical Analysis: Gold price retreats further from two-week high touched on Tuesday, manages to hold above 50-day SMA

The overnight failure to find acceptance above the $2,040-2,042 supply zone and some follow-through selling below the 50-day Simple Moving Average (SMA), currently around the $2,030-2,029 region, will expose the $2,012-2,010 support zone. This is followed by the $2,000 psychological mark, which if broken decisively will be seen as a fresh trigger for bearish traders and pave the way for deeper losses. The Gold price might then accelerate the decline towards the 100-day SMA, currently near the $1,979-1,978 area, before eventually dropping to the very important 200-day SMA, near the $1,964 region.

On the flip side, bulls need to wait for acceptance above the $2,040-2,042 static resistance and a subsequent move beyond the overnight swing high, around the $2,048-2,049 region, before placing fresh bets. Given that oscillators on the daily chart have just started moving into the positive territory, the Gold price could then accelerate the positive move towards the next relevant hurdle near the $2,077 zone. The momentum could extend further and allow bullish traders to aim back towards reclaiming the $2,100 round-figure mark.