Gold price rebounds as Greenback drops amid neutral Fed policy guidance

• Gold price seems supported above $1,920.00 for now as US Dollar corrects.
• Investors await United States inflation data for further guidance.
• Fed Williams, Harker expect that interest rates have peaked for now.

Gold price (XAU/USD) capitalizes on correction in the US Dollar propelled by positive market sentiment. The precious metal rebounds as Federal Reserve (Fed) policymakers anticipate that interest rates by the central bank have peaked for now. Also, the Fed could consider rate cuts next year if inflation continues to decelerate and job hiring slows further.

For September’s monetary policy guidance, investors await Thursday’s United States Consumer Price Index (CPI) data. Investors expect a rebound in headline CPI after a soft spell as recovered oil prices lift gasoline prices. US hiring slowed in July while the US Unemployment Rate remains near historic lows. Now July’s inflation data will set a base for the next interest rate decision.

Daily Digest Market Movers: Gold price rebounds after correction in US Dollar

• Gold price finds a temporary cushion after correcting swiftly to $1,920.00 as US Dollar faces a sell-off ahead of United States inflation data.
• The US Dollar Index senses heat due to neutral interest rate guidance from Federal Reserve policymakers.
• Philadelphia Fed President Patrick Harker said on Tuesday that the central bank could hold interest rates steady at this point and let monetary policy do its job. Investors should note that Fed Harker is not a voting member this year.
• Also, New York Fed President John Williams thinks interest rates have peaked for now and expects that the central bank will consider rate cuts next year.
• The US Dollar Index corrects sharply to near 102.40 as market sentiment turns positive, supported by the People’s Bank of China’s (PBoC) stronger-than-expected exchange rate fixing.
• Hawkish commentary from Fed Governor Michelle Bowman that the collaboration of still-elevated inflation and an upbeat labor market supports further policy tightening fails to keep the US Dollar at elevated levels.
• After a hiring slowdown and sustained wage growth, investors are shifting their focus toward the inflation data, which will be published on Thursday at 12:30 GMT.
• Per estimates, headline and core CPI that excludes volatile food and oil prices maintained a monthly pace of 0.2% in July. Annual headline CPI is expected to rebound to 3.3% vs. June’s print of 3.0%. On the contrary, core inflation is forecast to decelerate marginally to 4.7% against a prior reading of 4.8%.
• A higher consensus for headline CPI is backed by a solid recovery in global oil prices.
• A recovery in inflationary pressures might force the Fed to consider continuing to raise interest rates.
• The US government is planning to ban investment in Chinese artificial intelligence (AI) companies, reported Bloomberg. The administration plans to target only those Chinese companies that get more than 50% of revenue from the sectors of quantum computing and AI.
• The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose to 91.1 last month, the highest since November 2022 due to easing concerns about inflation expectations.
• On Tuesday, the US Census Bureau reported a Goods & Services Trade Balance deficit at a three-month low of $65.5 billion amid a decline in merchandise imports due to moderating consumer demand.

Technical Analysis: Gold price bounced back after testing $1,920

Gold price finds a short-term cushion after testing crucial support of $1,920.00. For a solid recovery, the precious metal needs to pass through plenty of filters ahead. On a broader note, Gold price seems vulnerable after a Bear Cross conducted by the 20 and 50-day Exponential Moving Averages (EMAs). The 200-EMA at $1,907.00 should continue to provide cushion to the yellow metal ahead.