Gold price languishes near two-month low, bears await break below 100-day SMA

• Gold price hits a fresh two-month low amid bets that the Fed will keep rates higher for longer.
• The expectations were reaffirmed by the stronger-than-expected US CPI released on Tuesday.
• A softer risk tone could lend support to the safe-haven XAU/USD and help limit further losses.

Gold price (XAU/USD) remains depressed below the $2,000 psychological mark and touches a fresh two-month low during the Asian session on Wednesday. A stronger-than-expected US inflation report released on Tuesday fueled speculations that the Federal Reserve (Fed) will wait until its June policy meeting before cutting interest rates and is seen as a key factor weighing on the non-yielding bullion. Meanwhile, hawkish Fed expectations remain supportive of elevated US Treasury bond yields and assist the US Dollar (USD) to preserve the overnight strong gains to its highest level since November 14, which further seems to undermine the commodity.

That said, the risk-off mood – as depicted by a slump across the global equity markets – helps the safe-haven Gold price to find some support near the 100-day Simple Moving Average (SMA). Any meaningful recovery, however, still seems elusive amid growing acceptance that the Fed will keep interest rates higher for longer in the wake of a still resilient US economy and sticky inflation. Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Wednesday, leaving the precious metal at the mercy of the USD and the broader risk sentiment. The fundamental backdrop, meanwhile, seems tilted in favour of bearish traders.

Daily Digest Market Movers: Gold price is undermined by delayed Fed rate cut bets, elevated US bond yields and bullish USD

• The US inflation data released on Tuesday tempered prospects of an early interest rate cut by the Federal Reserve and continues to undermine the non-yielding Gold price.
• The Bureau of Labor Statistics reported that the headline US CPI rose by 0.3% in January and softened to the 3.1% YoY rate from the 3.4% in December, beating expectations.
• Furthermore, the Core CPI, which excludes volatile food and energy prices, also surpassed consensus estimates and matched December's increase of 3.9%.
• Against the backdrop of the recent stronger US macro data, the still-too-high consumer inflation gives the Fed little reason to rush on cut interest rates.
• The CME Group's FedWatch Tool indicates just over a 35% chance of a rate cut in April and that the Fed will likely not cut rates until the June policy meeting.
• The expectations lift the yield on the benchmark 10-year US government bond to its highest level since December 1 and act as a tailwind for the US Dollar.
• Renewed concerns over higher for longer interest rates temper investors' appetite for riskier assets and assist the XAU/USD to defend the 100-day SMA support.

Technical Analysis: Gold price could extend the declining trend once 100-day SMA support is broken decisively

From a technical perspective, some follow-through selling below the $1,990-1,988 region (100-day SMA) might expose the very important 200-day SMA support, currently pegged near the $1,965 area. A convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move. The Gold price might then fall to an intermediate support near the $1,952-1,950 zone before eventually dropping to the November 2023 low, around the $1,932-1,931 region.

On the flip side, any attempted recovery beyond the $2,000 mark now seems to confront stiff resistance near the $2,011-2,012 area. That said, some follow-through buying, leading to a subsequent strength beyond the $2,015 level, might trigger a short-covering rally and lift the Gold price to the 50-day SMA, currently around the $2,030 region. The latter should act as a key pivotal point, which if cleared decisively should pave the way for additional gains beyond the $2,044-2,045 intermediate hurdle, towards the $2,065 supply zone.