Gold price holds steady near weekly top amid Fed rate cut bets, weaker USD

• Gold price is seen consolidating its weekly gains registered over the past two days.
• Rebounding US bond yields and a positive risk tone act as a headwind for the metal.
• The Fed’s dovish tilt, along with sustained USD selling, continue to lend support.

Gold price (XAU/USD) struggles to capitalize on its gains registered over the past two days and oscillates in a narrow trading band below the $2,040 level during the Asian session on Thursday. The precious metal, for now, seems to have stalled the post-FOMC rally from the vicinity of the 50-day Simple Moving Average (SMA) support and remains below a one-and-half-week top touched on Thursday. The global risk sentiment remains supported by the Federal Reserve's (Fed) dovish tilt and hopes for more stimulus from China. Apart from this, the better-than-expected Chinese macro data released on Friday boosts investors' appetite for riskier assets, which, along with a modest pickup in the US Treasury bond yields, acts as a headwind for the yellow metal.

Meanwhile, the Fed on Wednesday signaled an end to its monetary policy tightening cycle and penciled in at least three 25 basis points (bps) rate cuts in 2024. This might keep a lid on any meaningful upside for the US bond yields and is seen weighing on the US Dollar (USD), which continues to lend some support to the non-yielding Gold price. Traders now look forward to the release of flash PMI prints from the Eurozone, the UK and the US for fresh insights into the health of the global economy. This would drive the broader market risk sentiment and influence demand for the safe-haven precious metal. Nevertheless, the XAU/USD remains on track to register modest weekly gains, reversing a part of last week's slide from the all-time peak.

Daily Digest Market Movers: Gold price is influenced by a combination of diverging forces

• Thursday's upbeat US macro data cast doubts over an early rate cut by the Federal Reserve, which provides some respite to the US Treasury bond yields and acts as a headwind for the Gold price amid the risk-on mood.
• The US Commerce Department reported that Retail Sales rose by 0.3% in November as compared to the 0.2% fall (revised down from -0.1%) recorded in the previous month and the 0.1% decline anticipated.
• Moreover, core Retail Sales, which excludes automobiles, surpassed consensus estimates pointing to a 0.1% contraction and climbed 0.2% last month, while Retail Sales Control Group increased 0.4%.
• The US Labor Department, meanwhile, reported that the number of Americans filing for unemployment insurance for the first time fell to 202K last week, registering the lowest level since mid-October.
• Data released from China on Friday showed Retail Sales jumped 10.1% YoY in November vs. the 7.6% previous and Industrial Production increased 6.6% YoY as against a 4.6% rise in the prior month.
• Following the high-impact data, the National Bureau of Statistics (NBS) said that persistently recovery in demand is helpful for the improvement in consumer prices and that China will not see deflation.
• The markets, meanwhile, are still 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 currently stand at 90%.
• This, along with the prevalent selling bias surrounding the US Dollar, which extends its decline for the fourth straight day and drops to over a four-month low, is seen lending support to the commodity.
• Moving ahead, Friday's release of flash global PMI prints could provide some impetus to the precious metal and allow traders to grab short-term opportunities on the last day of the week.

Technical Analysis: Gold price bulls need to wait for sustained strength beyond the $2,040 area

From a technical perspective, failure to find acceptance above the $2,040 supply zone warrants some caution for bullish traders. That said, positive oscillators on the daily chart support prospects for a further near-term appreciating move. Hence, some follow-through buying has the potential to lift the Gold price 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 $1,979-1,978 region. This is followed by the weekly low, around the $1,973-1,972 area, and the 200-day SMA, near the $1,950 zone, which if broken decisively will shift the near-term bias in favour of bearish traders.