Gold price struggles to capitalize on modest intraday uptick amid stronger US Dollar

Gold price (XAU/USD) trims a part of its modest intraday gains, albeit manages to hold its neck comfortably above the $2,500 psychological mark through the early European session on Thursday. The crucial US Consumer Price Index (CPI) report released on Wednesday suggests that the underlying inflation remains sticky and tempered expectations for a larger interest rate cut by the Federal Reserve (Fed). This leads to a modest uptick in the US Treasury bond yields and pushes the US Dollar (USD) back closer to the monthly peak, which, in turn, is seen acting as a headwind for the non-yielding yellow metal.

Apart from this, the upbeat mood – as depicted by a generally positive tone around the equity markets – turns out to be another factor that contributes to capping the safe-haven Gold price. The downside for the XAU/USD, however, seems limited amid growing acceptance that the US central bank will begin its policy easing cycle in September and lower borrowing costs by 25 bps at all three remaining meetings this year. This, along with the recent range-bound price action, warrants caution before positioning for a firm near-term direction as traders look to the US Producer Price Index (PPI) for a fresh impetus. 

Daily Digest Market Movers: Gold price lacks bullish conviction as US CPI dampens hopes for larger Fed rate cut

• Gold price fell on Wednesday after the crucial US Consumer Price Index (CPI) report forced investors to scale back their expectations of a larger, 50-basis-points interest rate cut by the Federal Reserve next week.
• The US Bureau of Labor Statistics reported that the headline CPI rose 0.2% in August, and the yearly rate decelerated more than anticipated, from 2.9% to 2.5%, marking the smallest increase since February 2021.
• Meanwhile, the core CPI, which excludes volatile food and energy prices, was up 0.3% during the reported month and rose 3.2% in the 12 months through August, matching July's increase and market expectations. 
• According to the CME Group's FedWatch tool, the markets are currently pricing in an 87% chance of a 25 bps rate cut at the next FOMC policy meeting on September 17-18, compared to 71% before the US CPI data.
• Diminishing odds for a more aggressive policy easing by the US central bank push the US Treasury bond yields and the US Dollar higher, which, in turn, is likely to act as a headwind for the non-yielding yellow metal.
• Traders now look forward to the release of the US Producer Price Index (PPI) for some impetus, though the market reaction is likely to be limited amid the prospects for an imminent start of the Fed's rate-cutting cycle.

Technical Outlook: Gold price might continue to confront stiff resistance near the $2,530-$2,532 area, or the all-time peak

From a technical perspective, the recent range-bound price action constitutes the formation of a rectangle on short-term charts and might still be categorized as a bullish consolidation phase against the backdrop of a rally from the June swing low. Adding to this, mixed oscillators on the daily chart make it prudent to wait for a breakout through the short-term range before placing fresh directional bets. Meanwhile, any subsequent move up might continue to confront some resistance near the $2,530-$2,532 region, or the all-time peak touched in August. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for the resumption of the prior well-established uptrend. 

On the flip side, weakness below the $2,500 mark is likely to find support near the $2,485 region ahead of the $2,470 horizontal zone. The latter coincides with the lower boundary of the aforementioned trading range and should act as a strong base for the Gold price. A convincing break below might prompt aggressive technical selling and drag the XAU/USD to the 50-day Simple Moving Average (SMA), currently pegged near the $2,453-$2,452 region. The corrective decline could extend further towards testing sub-$2,400 levels, or the 100-day SMA support.