Gold Price reverses part of post-US CPI downdraft amid Middle East tensions

• Gold price regains some positive traction following the overnight post-US CPI decline.
• Persistent geopolitical risks and Fed rate cut bets continue to offer support to the metal.
• A modest USD uptick and a positive risk tone could act as a headwind for the XAU/USD.

Gold price (XAU/USD) witnessed an intraday turnaround from the vicinity of the record peak and dropped over 1.5% intraday following the release of the US consumer inflation figures on Wednesday. The closely-watched US CPI indicated that inflation is on a downward trend and reaffirmed bets for an imminent start of the Federal Reserve's (Fed) rate-cutting cycle in September. Investors, however, scaled back their expectations for more aggressive policy easing, which led to a modest US Dollar (USD) rebound from the vicinity of a multi-month low touched last week and weighed on the non-yielding yellow metal. 

That said, the risk of a broadening conflict in the Middle East helped limit the downside for the safe-haven Gold price and find some support near the $2,438 area. The precious metal recovered around $10 from the daily low and gained some follow-through traction during the Asian session on Thursday, though a further USD buying keeps a lid on any meaningful appreciating move. Nevertheless, the XAU/USD, for now, seems to have snapped a two-day losing streak as traders now look to the US Retail Sales figures and other important US macro releases for a fresh impetus later during the North American session on Thursday.

Daily Digest Market Movers: Gold price attracts some haven flows amid dovish Fed expectations

• Data published on Wednesday showed that US consumer prices rebounded as anticipated in July and dashed hopes for a bigger interest rate cut by the Federal Reserve in September. 
• In fact, the US Labor Department's Bureau of Labor Statistics (BLS) reported that the headline US CPI rose moderately, by 0.2% in July after falling 0.1% in the previous month. 
• The annual increase in the CPI, however, slowed a bit and fell below 3% for the first time in nearly 3-1/2 years, suggesting continued progress towards the Fed's inflation goals.
• The core CPI, which excludes volatile food and energy prices, increased by 0.2% during the reported month and eased to 3.2% in the 12 months through July from 3.3% in June.
• According to the CME Group's FedWatch Tool, investors now see a 36% chance of a 50-basis point rate cut at the next FOMC meeting versus the 50% prior to the US CPI data. 
• This triggered a late recovery in the US Treasury bond yields, which assisted the US Dollar in attracting some buyers at lower levels and weighed on the non-yielding yellow metal. 
• The USD Index (DXY) gains some follow-through traction on Thursday and acts as a headwind for the commodity, though elevated geopolitical tensions continue to offer some support.
• Mediators are hoping to kick-start ceasefire negotiations between Israel and Hamas on Thursday amid the risk of an imminent Iranian attack on Israel within the next few days. 
• Traders now look to the US economic docket – featuring Retail Sales, Weekly Initial Jobless Claims and regional manufacturing indices – for short-term opportunities. 

Technical Outlook: Gold price bulls have the upper hand while above the weekly low around $2,424

From a technical perspective, the overnight swing low, around the $2,438 region, now seems to protect the immediate downside ahead of the $2,424 area, or the weekly trough touched on Monday. Some follow-through selling could make the Gold price vulnerable to weaken further below the $2,400 mark and test the 50-day Simple Moving Average (SMA) pivotal support, currently pegged near the $2,380 zone. A convincing break below the latter might expose the 100-day SMA, near the $2,360 region, which if broken decisively will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.

Meanwhile, oscillators on the daily chart are holding in positive territory and support prospects for additional near-term gains. That said, any further move up is more likely to confront some resistance near the $2,471-2,472 region ahead of the $2,483-$2,484 area or the all-time peak touched in July. A subsequent rise beyond the $2,500 psychological mark will confirm a breakout through a one-month-old broader trading range and set the stage for a further near-term appreciating move.