Gold price trades sideways as Fed's interest-rate outlook remains uncertain

• Gold price seeks potential support but it is pressured by a strong US Dollar and increasing Treasury yields.
• Fed’s higher for longer interest-rate stance keeps Gold price under pressure.
• US Durable Goods Orders are seen contracting at a slower pace in August.

Gold price (XAU/USD) looks for a cushion after facing a sell-off as Federal Reserve (Fed) policymakers continue to favor further policy tightening due to the resilient United States economy. The precious metal struggles for a firm footing as Fed policymakers expect that additional efforts will likely be needed to bring inflation back to the desired rate as decent labor demand and robust consumer spending momentum keep price pressures high. 

While fears of a global slowdown continue to build pressure on risk-sensitive assets, the US Dollar and Treasury yields remain upbeat on the Fed’s “higher for longer” interest-rate stance. Going forward, investors will focus on the US Durable Goods Orders data on Wednesday, which will provide guidance about the health of the country’s manufacturing sector.

Daily Digest Market Movers: Gold price pressured by higher US Yields

• Gold price finds an interim support near $1,910.00 after an intense sell-off. The broader trend remains weak as Federal Reserve policymakers continue to support the “higher for longer” plot to ensure that inflation softens to 2%.
• The broader trend in the Gold price is directionless as the downside is also supported by expectations of no more interest rate hikes in the last quarter of 2023.
• As per the CME Group Fedwatch tool, traders see almost an 82% chance that interest rates will remain steady at 5.25%-5.50% at the November monetary policy meeting. For the remainder of 2023, the possibility for steady interest rates is at 61%.
• On Monday, Gold price was pressured by hawkish remarks from Fed policymakers, namely from Minneapolis Federal Reserve Bank President Neel Kashkari and Boston Fed President Susan Collins.
• Fed Governor Kashkari said that the central bank will likely need to raise interest rates further and keep them elevated for some time to bring down inflation to 2%. "If the economy is fundamentally much stronger than we realized, on the margin, that would tell me rates probably have to go a little bit higher, and then be held higher for longer to cool things off," he added, as reported by Reuters.
• About rate cut expectations, Fed Kashkari cited that if inflation softens in 2024, the Fed will cut rates to avoid too much tightening.
• Fed’s Collins said on Friday that a further rate hike is certainly not off the table. She further added that inflation can fall with only a modest rise in unemployment and that core services inflation excluding shelter has not yet shown a sustained improvement.
• Contrary to hawkish Fed policymakers, Morgan Stanley’s Chief US Economist Ellen Zentner believes that the Fed is done hiking rates.
• The US Dollar Index (DXY) consolidates near a fresh 10-month high at 106.20 as incoming data continues to point to a resilient US economy and upbeat labor market conditions. . 10-year US Treasury yields rose sharply to 4.55%.
• While the US Dollar and Treasury yields have increased significantly, the pace of decline in the Gold price is slow, indicating a supported downside on expectations that the Fed is done with hiking interest rates.
• For further action, investors await the Durable Goods Orders report for August, which will be released on Wednesday. Orders are seen contracting at a slower pace of 0.4% against the 5.2% decline seen in July.
• The US manufacturing sector is already going through a vulnerable phase. The US Manufacturing PMI has been contracting for a long period and a weak new order book indicates that factory activity will remain in contraction.

Technical Analysis: Gold price trades directionless

Gold price discovers an intermediate support near $1,910.00 but the overall trend is sideways amid uncertainty over the interest rate outlook. On a daily chart, the precious metal auctions in a Symmetrical Triangle chart pattern, which demonstrates a volatility compression. The 200-day Exponential Moving Average (EMA) around $1,910.00 continues to act as a major support for Gold price, while the 50-day EMA near $1,927.00 is acting as a major resistance.