Gold price drifts lower amid positive risk tone, dovish Fed expectations to help limit losses

• Gold price edges lower on Friday and erodes a part of the overnight strong gains 
• Easing fears of an imminent US recession and the risk-on mood act as a headwind.
• Bets for a 50 bps Fed rate cut in September and geopolitical risks to lend support.

Gold price (XAU/USD) struggles to capitalize on the previous day's strong move-up of nearly 2% and edges lower during the Asian session on Friday. A generally positive tone across the global equity markets exerts some downward pressure on the safe-haven precious metal, though a combination of factors should help limit any meaningful downside. Fears of a wider Middle East conflict might keep a lid on the optimism, which, along with bets for bigger rate cuts by the Federal Reserve (Fed), could offer some support to the non-yielding yellow metal. 

Meanwhile, dovish Fed expectations act as a headwind for the US Treasury bond yields and drag the US Dollar (USD) away from the weekly high touched on Thursday. This, in turn, favors bullish traders and suggests that the path of least resistance for the Gold price is to the upside. Hence, any further decline might still be seen as a buying opportunity and remain limited in the absence of any relevant market-moving economic releases from the US. The market focus, meanwhile, will remain glued to the US consumer inflation figures, due for release next Wednesday.

Daily Digest Market Movers: Gold price is undermined by fading safe-haven demand, downside seems limited

• The markets have fully priced in a 25-basis points rate cut by the Federal Reserve in September and have been speculating on the possibility of a 50-bps rate cut, offering support to the Gold price.
• Adding to this, the assassination of Hamas chief Ismail Haniyeh in Tehran last week has raised the risk of retaliatory strikes by Iran on Israel and further benefited the safe-haven XAU/USD. 
• The US data released on Thursday showed that there were 233K initial jobless claims in the week ending August 3 as compared to expectations for a 240K print and 249K in the previous week. 
• The upbeat reading eased concerns about an economic downturn in the world's largest economy, triggering a move higher in the US Treasury bond yields and lifting the US Dollar to the weekly top.
• Meanwhile, receding fears of a possible recession in the US boosted investors' confidence and led to a strong relief rally in the US equity markets, which, in turn, capped gains for the precious metal.
• Traders, meanwhile, reacted little to the better-than-expected Chinese inflation figures, which showed that the headline CPI rose 0.5% over the year in July after reporting a 0.2% increase in June.
• This, however, was offset by the fact that China’s PPI extended a long stretch of declines witnessed since November 2022 and fell by the 0.8% YoY rate in July, at the same pace as seen in June. 

Technical Analysis: Gold price is likely to attract dip-buyers near $2,412-2,413 resistance-turned-support

From a technical perspective, the recent bounce from the 50-day Simple Moving Average (SMA) support and the subsequent move up favors bullish traders. Moreover, oscillators on the daily chart have again started gaining positive traction and suggest that the path of least resistance for the Gold price is to the upside. Hence, some follow-through strength towards the next relevant hurdle, near the $2,448-2,450 region, looks like a distinct possibility. The momentum could extend further towards challenging the all-time top near the $2,483-2,484 area touched in July. The latter is closely followed by the $2,500 psychological mark, which if cleared decisively will set the stage for a further near-term appreciating move.

On the flip side, the $2,412-2,410 horizontal resistance breakpoint now seems to protect the immediate downside ahead of the $2,400 round-figure mark. Any further decline might continue to attract dip-buyers and remain cushioned near the 50-day SMA support, currently pegged near the $2,372-2,371 region. This should act as a key pivotal point, below which the Gold price could aim to retest last week's swing low, around the $2,353-2,352 area. Failure to defend the said support levels might shift the bias in favor of bearish traders and expose the 100-day SMA support, around the $2,342 zone.