Gold price oscillates in a narrow band; softer US bond yields and USD lend support

• Gold price struggles to capitalize on the overnight gains amid hawkish Fed expectations.
• A modest downtick in the US bond yields undermines the USD and lends some support.
• Geopolitical risks and China’s economic woes also contribute to limiting the downside.

Gold price (XAU/USD) ended in the green on Tuesday and snapped a two-day losing streak to over a one-week low, around the $2,015 region touched the previous day. The precious metal, however, struggles to capitalize on the momentum and oscillates in a narrow band during the Asian session on Wednesday. Traders opt to wait for more cues about the likely pace of interest rate cuts by the Federal Reserve (Fed) this year, which tends to drive sentiment surrounding the non-yielding bullion. Hence, the focus will remain glued to the latest US consumer inflation figures, due for release next week.

In the meantime, firming expectations that the Fed will keep rates higher for longer in the wake of a still resilient US economy continue to act as a headwind for the Gold price. The US Dollar (USD), however, remains depressed below its highest level in almost three months touched on Monday amid a softer tone surrounding the US Treasury bond yields. Apart from this, worries about geopolitical tensions stemming from conflicts in the Middle East and slowing growth in China – the world's second-largest economy – could act as a tailwind for the safe-haven precious metal and limit the downside.

Moving ahead, Wednesday's US economic docket features the only release of Trade Balance data and is unlikely to provide any meaningful impetus. That said, speeches by influential FOMC members, along with the US bond yields, will drive the USD demand later during the North American session. Apart from this, the broader risk sentiment should contribute to producing short-term trading opportunities around the Gold price.

Daily Digest Market Movers: Gold price lacks any firm intraday direction amid mixed fundamental cues

• Investors continue to scale back their expectations for early and steep interest rate cuts by the Federal Reserve, which fails to assist the Gold price to build on the previous day's modest gains.
• The incoming stronger US macro data, influencing Friday's blockbuster NFP report, suggested that the economy is in good shape, giving the Fed the headroom to keep rates higher for longer.
• Furthermore, the recent hawkish remarks by influential FOMC members, including Fed Chair Jerome Powell, squashed market expectations for more aggressive policy easing in 2024.
• Fed Chair Jerome Powell, in an interview with US TV show 60 Minutes aired on Sunday, reiterated that the March meeting is likely too soon to have confidence to start cutting interest rates.
• Philadelphia Fed President Patrick Harker said on Tuesday that inflation must be moving sustainably lower to open the door to rate cutsr and that it would be a mistake to cut interest rates prematurely.
• Harker added that the recent news on inflation has been encouraging, though wage gains are still too high for getting to the 2% target and it is possible that inflation may be more persistent than expected.
• Separately, Minneapolis Fed President Neel Kashkari said that we are not done yet on inflation and most of the disinflationary gains have come from the supply side, but the data is looking positive.
• The yield on the benchmark 10-year US government bond slides back closer to 4.0% and undermines the US Dollar, lending support to the XAU/USD amid persistent geopolitical risks.
• The US continues its campaign against Houthi rebels in Yemen and intends to launch further strikes at Iran-backed groups, raising the risk of a further escalation of tensions in the Middle East.
• Traders now look to the US Trade Balance data and Fed speeches for short-term opportunities, though the focus remains glued to the release of the latest US consumer inflation figures next week.

Technical Analysis: Gold price remains confined in a familiar range around 50-day SMA pivotal point

From a technical perspective, the overnight swing low, around the $2,023 area, now seems to protect the immediate downside ahead of the weekly trough, around the $2,015 region. Some follow-through selling below the $2,012-2,010 area might expose the $2,000 psychological mark. A convincing break below the latter could drag the Gold price towards the 100-day Simple Moving Average (SMA), currently around the $1,985 zone, en route to the 200-day SMA, near the $1,966-1,965 region.

On the flip side, any meaningful positive move is likely to confront stiff resistance near the $2,054-2,055 zone. This is followed by the $2,065 hurdle or last week's swing high. Given that oscillators on the daily chart are holding in the positive territory, a sustained strength beyond has the potential to lift the Gold price towards the $2,078-2,079 area, or the YTD peak set in January. The subsequent move-up should allow the XAU/USD to reclaim the $2,100 mark and climb further to the next relevant hurdle near the $2,020 region.