Gold price trades just below two-week top amid sliding US bond yields

FX Street carries an article about gold price reversing an intraday dip and climbing to $2,035, Caliber.Az reprints the article.

Gold price (XAU/USD) reverses an intraday dip and climbs to the $2,035 region during the early European session, though remains below a two-week high touched on Friday. The US Dollar (USD) continues with its struggle to attract any buyers amid retreating US Treasury bond yields, which, in turn, is seen as a key factor acting as a tailwind for the commodity. Apart from this, persistent worries about geopolitical risks stemming from conflicts in the Middle East and the prolonged Russia-Ukraine war lend additional support to the safe-haven precious metal. 

It, however, remains to be seen if the Gold price can capitalize on the strength beyond the 50-day Simple Moving Average (SMA) amid hawkish Federal Reserve (Fed) expectations. In fact, market participants seem convinced that the US central bank will keep interest rates higher for longer. This should help limit any meaningful downside for the US bond yields and favour the USD bulls, warranting caution before positioning for any further appreciating move for the XAU/USD. Traders now look to the release of New Home Sales data from the US for some impetus.

Daily Digest Market Movers: Gold price draws support from retreating US bond yields, softer USD

The US Dollar registered its first weekly decline for 2024, which, along with increasing demand for traditional safe-haven assets, lifted the Gold price to over a two-week high on Friday.

The growing conviction that the Federal Reserve will wait until the June policy meeting before cutting interest rates keeps a lid on any further appreciating move for the non-yielding yellow metal.

The January FOMC meeting minutes released last week revealed that policymakers generally agreed that they needed greater confidence in falling inflation before considering cutting rates.

Adding to this, a number of prominent Fed officials recently suggested that imminent interest rate cuts are unlikely as the central bank aims to bring inflation back to the two per cent annual target.

The US Treasury bond yields retreated from a fresh YTD peak touched last week, though remain well supported by the Fed's hawkish outlook and continue to act as a tailwind for the US Dollar.

Investors, meanwhile, remain concerned about geopolitical risks stemming from conflicts in the Middle East and the Russia-Ukraine war, which could lend some support to the safe-haven XAU/USD.

Israel expressed its intentions to expand its operations to destroy Hamas amid the uncertainty over a ceasefire, while Russia is preparing a new offensive against Ukraine starting in late May or summer.

US and UK fighter planes carried out strikes on Houthi sites in Yemen on Saturday amid sustained attacks by the Iran-backed Houthi rebels on commercial vessels in the important Red Sea trade route.

Ukraine's President Volodymyr Zelenskyy said on February 25 that Russia is preparing a new offensive against the country starting in late May or summer and Kyiv has a clear battlefield plan of its own.

Investors now await this week's key US macro data, including the Core PCE Price Index, for clues about the Fed's future policy decision before placing fresh directional bets around the commodity.

Technical Analysis: Gold price needs to find acceptance above 50-day SMA for bulls to seize control

From a technical perspective, failure to find acceptance above the 50-day SMA and a modest pullback from the $2,041-2,042 intermediate hurdle warrants some caution for bullish traders. That said, oscillators on the daily chart have just started gaining positive traction and support prospects for additional near-term gains. Hence, any subsequent decline is more likely to attract fresh buyers near the $2,024 horizontal support.

A convincing break below, however, will expose the 100-day SMA, currently pegged near the $2,007 area. This is followed by the $2,000 psychological mark, which if broken decisively might shift the bias in favour of bearish traders. The Gold price might then accelerate the slide towards the $1,984 region before eventually dropping to the very important 200-day SMA support near the $1,967-1,966 zone.

On the flip side, bulls need to wait for a move beyond Friday's swing high, around the $2,041-2,042 area, before placing fresh bets. The Gold price might then aim to challenge the next relevant hurdle near the $2,065 supply zone. Some follow-through buying will set the stage for a move towards reclaiming the $2,100 round figure mark for the first time since early December 2023.