Gold price remains on the defensive amid the post-FOMC USD recovery from YTD low

• Gold price struggles to lure buyers despite the Fed’s jumbo interest rate cut on Wednesday.
• A further recovery in the US bond yields underpins the USD and caps the non-yielding metal.
• Concerns about an economic slowdown, along with geopolitical risks, help limit the downside.

Gold price (XAU/USD) witnessed an intraday turnaround after hitting a new record high, around the $2,600 mark and settled in the red for the second straight day on Wednesday. The initial spike in the commodity followed the US Federal Reserve's (Fed) decision to kick-start the policy-easing cycle with an oversized rate cut. The rally, however, ran out of steam after Fed Chair Jerome Powell cooled hopes for a string of 50 basis point rate cuts ahead, which triggered a sharp US Dollar (USD) recovery from a 14-month low and weighed on the non-yielding yellow metal. 

Gold price subsequently dropped to a four-day low, though a combination of factors helped limit further losses. Investors remain concerned about an economic slowdown in the United States (US) and China – the world's two largest economies. This, along with persistent geopolitical risks stemming from the ongoing conflicts in the Middle East, offers some support to the safe-haven precious metal. That said, some follow-through USD buying failed to assist the commodity in registering any meaningful recovery and remained depressed during the Asian session on Thursday. 

Daily Digest Market Movers: Gold price is undermined by rising US bond yields and a modest USD strength; downside seems limited

• Gold prices faded from the post-FOMC spike to a fresh record high and dived to a multi-day low on Wednesday amid a goodish US Dollar recovery from its lowest level since July 2023.
• The Federal Reserve lowered its benchmark interest rate by 50 basis points to the 4.75%-5% range and forecast rates falling by another half of a percentage point by the end of this year. 
• In the so-called dot plot, Fed members projected rates falling to 3.4% in 2025, down from a prior forecast of 4.1%, and declining to 2.9% in 2026, down from a prior forecast of 3.1%.
• The new economic projections revealed that the Fed doesn't see inflation returning to the 2% target before 2026, raising questions about the magnitude of interest rate cuts going forward. 
• Meanwhile, Fed Chair Jerome Powell, during the post-meeting press conference, downplayed concerns about a recession amid cooling inflationary pressures and a very solid labor market.  
• This, in turn, triggered a sharp rise in the US Treasury bond yields, which extends through the Asian session on Thursday and assists the Greenback to build on its recovery momentum. 
• Iran-backed Hezbollah said it attacked Israeli artillery positions with rockets on Wednesday in retaliation to blasts in Lebanon, which killed 20 people and injured more than 450.
• Israel’s Defence Minister Yoav Gallant declared the start of a new phase in the war, raising the risk of a wider Middle East conflict, which could benefit the safe-haven XAU/USD. 

Technical Outlook: Gold price could extend the corrective slide once the $2,532-2,530 immediate support is broken decisively

From a technical perspective, any subsequent slide is more likely to find decent support near the previous cycle high, around the $2,532-2,530 area. Some follow-through selling will expose the next relevant support near the $2,517-2,515 area, below which the Gold price could accelerate the corrective decline to the $2,500 psychological mark. The downward trajectory could extend further towards the $2,470 confluence – comprising the 50-day Simple Moving Average (SMA) and the lower boundary of a short-term ascending channel. The latter should act as a key pivotal point, which if broken decisively might shift the near-term bias in favor of bearish traders. 

On the flip side, the $2,577-2,578 region now seems to act as an immediate hurdle ahead of the $2,600 mark, or the all-time peak touched on Wednesday. The subsequent move up could allow the Gold price to challenge the trend-channel resistance, currently pegged near the $2,610-2,612 region. A convincing breakout through the said barrier will be seen as a fresh trigger and set the stage for an extension of the recent well-established uptrend witnessed over the past three months or so.