Gold Price Nears Weekly Peak with US Dollar and Bond Yields in Focus

Gold price (XAU/USD) holds near a one-week top in the Asian session on Thursday, maintaining its ground below the 50-day Simple Moving Average (SMA) pivotal resistance. The incoming US macro data indicated signs of easing inflationary pressures and a slowing economy, fueling speculations that the Federal Reserve (Fed) will cut interest rates twice this year. This speculation has been a key driver of flows towards the non-yielding yellow metal, boosting the gold price.

Key Takeaways:

• Gold price holds near a weekly high amid Fed rate-cut bets and geopolitical risks.
• Stabilizing US Dollar and bond yields cap gold's upside potential.
• Technical indicators suggest key resistance and support levels to watch for gold's next move.

Factors Supporting the Gold Price

Adding to the positive momentum for gold price, geopolitical tensions and renewed political uncertainty in Europe provide additional support to the safe-haven precious metal. Despite the Fed's more hawkish stance, with policymakers favoring only one rate cut in 2024, a bounce in US Treasury bond yields has revived US Dollar (USD) demand. This resurgence in the USD has kept a lid on any significant gains for the gold price.

Market Reactions and Economic Indicators Impacting Gold Price

The uncertainty over the timing of the Fed's interest rate cuts keeps traders cautious, resulting in subdued, range-bound price action around the gold price. The Fed's projection of only one rate cut this year, down from three projected in March, supports US Treasury bond yields and limits the upside for gold. Additionally, recent US Retail Sales data pointed to lackluster economic activity, suggesting that the Fed might ease monetary policy soon.

Current market pricing indicates a higher likelihood of the first rate cut in September, with another possible cut in November or December, offering some support to the gold price. Geopolitical risks, such as Ukrainian drone strikes on Russian energy infrastructure and Israel's warning of a potential war with Iran-backed Hezbollah, further contribute to gold's appeal as a safe-haven asset.

Technical Analysis of Gold Price

From a technical perspective, bulls may wait for sustained strength beyond the 50-day Simple Moving Average (SMA) support-turned-resistance, currently near the $2,344-2,345 region, before placing fresh bets. A decisive move above this level could suggest that the recent corrective decline has ended, potentially lifting the gold price beyond the $2,360-2,362 zone towards the $2,387-2,388 intermediate hurdle and eventually the $2,400 mark.

The momentum could extend towards the all-time peak around the $2,450 area touched in May.

On the downside, the $2,320-2,318 region is likely to offer immediate support, followed by the $2,300 mark. Further selling pressure below the $2,285 horizontal support could trigger a fresh bearish trend, paving the way for a decline towards the next significant support near the $2,254-2,253 region, and potentially down to the $2,225-2,220 support and the $2,200 round-figure mark.