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Feb 15
2024

Gold price hangs near two-month low, bears not ready to give up yet

Gold price remains confined in a range just above a two-month low touched on Wednesday. Delayed Fed rate cut bets underpin the USD and act as a headwind for the non-yielding metal. Geopolitical tensions in the Middle East help to limit the downside for the safe-haven XAU/USD.

As observed on the daily chart, Gold price closed Wednesday below the 100-day Simple Moving Average (SMA) at $1,993, opening the floor for further downside. The 14-day Relative Strength Index (RSI) is attempting a recovery but remains well below the midline, suggesting that any rebound in Gold price could likely be temporary.

Meanwhile, the 21-day and 50-day SMAs Bear Cross, confirmed last week, also remains in play, supporting Gold sellers. Against these bearish technical indicators, any corrective upside in Gold price is expected to be a ‘sell the bounce’ trade’ in the near term.

Key support levels are now seen at the December 13 low of $1,973 and the horizontal 200-day SMA at $1,966. A sustained move below the latter will put the $1,950 psychological level at risk. On the contrary, if Gold price manages to recapture the 100-day SMA support-turned-resistance at $1,993 on a daily closing basis, a fresh recovery toward the 21-day SMA of $2,024 cannot be ruled out. Ahead of that, Gold price needs to find a strong foothold above the $2,000 barrier.

 

Fundamental Overview

The market mood remains mixed so far this Thursday’s trading, as investors assess the conflicting messages from US Federal Reserve (Fed) policymakers and its implications on the pricing of the dovish policy pivot this year. The uncertainty around the timing of Fed interest rate cuts, following strong US Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) data for January, keeps the corrective mode intact in the US Dollar, as well as, the US Treasury bond yields.

Fed Vice Chair for Supervision Michael Barr said on Wednesday, the Fed remained confident, but the January CPI numbers show the United States' path back to 2% inflation "may be a bumpy one." Barr said that he fully supported what he called a careful approach to considering policy normalization given current conditions.

Meanwhile, investors also remain unnerved amid fresh worries concerning the Japanese economic outlook, after Japan unexpectedly slipped into recession after reporting two consecutive quarters of negative growth.

Recession fears could likely support the traditional safe-haven Gold price. Further, expectations of a drop of 0.1% in the US Retail Sales for January also help the Gold price recover some ground. Disappointing US Retail Sales data could suggest weakening consumer demand and revive the Fed rate cut expectations. Markets are currently pricing in a no-Fed rate cut in March and a lower than 50% chance of easing in May. The odds of a Fed pivot pivot are now seen for the June meeting.

Apart from the US Retail Sales data release, the focus will also remain on the Jobless Claims and speeches from Fed officials for fresh cues on the Fed rate cut expectations, eventually impacting the US Dollar-denominated Gold price.

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