Gold price stalls dovish Fed-inspired rally near $2,040 hurdle, bullish potential seems intact

• Gold price attracts some follow-through buying for the second straight day on Thursday.
• The US bond yields and the USD extend the post-FOMC slide, lending support to the metal.
• The risk-on environment caps gains for the XAU/USD ahead of the central bank bonanza.

Gold price (XAU/USD) builds on the previous day's solid recovery from the vicinity of the 50-day Simple Moving Average (SMA), around the $1,973 area, or over a three-week low and gains positive traction for the second successive day on Thursday. The Federal Reserve (Fed) signalled on Wednesday that it is done raising interest rates and the so-called "dot plot" indicated three 25 basis points (bps) rate cuts in 2024. Moreover, policymakers see inflation heading towards the Fed's 2% target without a recession. The dovish shift led to a steep decline in the US Treasury bond yields and weighed heavily on the US Dollar (USD), providing a goodish lift to the non-yielding yellow metal.

The USD selling bias remains unabated through the Asian session on Thursday, though the prevalent risk-on environment caps the safe-haven Gold price near the $2,040 supply zone. Traders opt to move to the sidelines ahead of the latest monetary policy updates by the Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) later today. Apart from this, the release of the US monthly Retail Sales data might provide some impetus to the metal. Nevertheless, the fundamental backdrop supports prospects for a further appreciating move.

Daily Digest Market Movers: Gold price continues to draw support from the Fed's dovish shift

• The Federal Reserve on Wednesday decided to keep interest rates at a 22-year high for the third meeting in a row and struck a more dovish tone in the accompanying policy statement.
• Policymakers see inflation getting closer to the 2% annual target without a recession and the fed funds rate peaking at 4.6% in 2024, down from September's projection of 5.1%.
• Data released on Wednesday showed that the rise in average prices that businesses pay to suppliers decelerated to 0.9% in November, down from a 1.2% annual increase in October.
• The markets were now pricing in a nearly 60% chance that the Fed will begin to cut rates at its March meeting and the odds of a May rate cut stand at 90% versus 80% before the announcement.
• The benchmark 10-year US government bond yield tumbles to its lowest level since August and the yield on the rate-sensitive two-year Treasury note touches its weakest level since July.
• The post-FOMC US Dollar selling lends additional support to the Gold price, albeit the risk-on environment keeps a lid on any further gains ahead of the central bank bonanza on Thursday.
• The Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) will announce their policy decisions later today, which might infuse some volatility.
• Traders on Thursday will further take cues from the US monthly Retail Sales data, which consensus estimates pointing to a fall for the second successive month, by 0.1% in November.

Technical Analysis: Gold price seems poised to appreciate further, awaits a move beyond $2,040 supply zone

From a technical perspective, some follow-through buying beyond the $2,040 area will be seen as a fresh trigger for bullish traders. With oscillators on the daily chart holding in the positive territory, the Gold price might then climb to the next relevant hurdle near the $2,072-2,073 region. The momentum could get extended further and allow the XAU/USD to reclaim the $2,100 round-figure mark.

On the flip side, the $2,012-2,010 horizontal zone might now protect the immediate downside ahead of the $2,000 psychological mark. A convincing break below the latter will make the Gold price vulnerable and expose the 50-day SMA support, currently pegged near the $1,973-1,972 region. This is followed by the 200-day SMA, near the $1,950 area, which if broken will shift the bias in favour of bearish traders.