Gold price clings to gains amid escalating tensions in Middle East, focus remains on Fed

  • Gold price draws some support from escalating geopolitical tensions in the Middle East.
  • Sliding US bond yields also benefit the XAU/USD, though a further upside seems limited.
  • Traders might further wait on the sidelines ahead of the FOMC decision on Wednesday.

Gold price (XAU/USD) catches fresh bids on the first day of a new week and builds on its steady intraday ascent through the early part of the European session. The precious metal breaks through the 50-day Simple Moving Average (SMA) barrier, though bulls need to wait for a move beyond the $2,040-2,042 supply zone before positioning for any further gains ahead of the FOMC decision on Wednesday.

Heading into the key central bank event risk, a further escalation of conflicts in the Middle East turns out to be a key factor acting as a tailwind for the safe-haven Gold price. Meanwhile, the flight to safety drags the US Treasury bond yields lower and further lends support to the XAU/USD. Meanwhile, the US Dollar (USD) remains below a one-month high touched last week and does little to provide an impetus.

That said, diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed) in 2024 might continue to act as a tailwind for the USD and cap the upside for the non-yielding Gold price. This, in turn, warrants some caution for bullish traders and makes it prudent to wait for strong follow-through buying before confirming that the precious metal has bottomed out near the $2,000 psychological mark.

Daily Digest Market Movers: Gold price remains supported by global  flight to safety amid geopolitical risks

  • The risk of a further escalation of geopolitical tensions in the Middle East weighs on investors' sentiment and lends support to the safe-haven Gold price on the first day of a new week.
  • A drone attack on a US base in Jordan killed three US soldiers, marking the first death of US service personnel in the region since the Hamas-Israel war broke out on October 7.
  • President Joe Biden doubled down on his pledge of reprisals and said that the US shall respond and hold all those responsible to account at a time and in a manner of our choosing.
  • The US Dollar (USD) holds steady just below a one-month peak as investors continue to scale back their expectations for a more aggressive easing by the Federal Reserve.
  • Data released on Friday, however, showed that inflation rose modestly in December and reaffirmed expectations that the Fed will start cutting interest rates by the middle of 2024.
  • The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index held steady at 2.6% on a yearly basis in December.
  • Meanwhile, the annual Core PCE Price Index – considered the Fed's preferred gauge of inflation – decelerated more than expected, to 2.9% from 3.2% in November.
  • Other details of the publication showed that Personal Spending rose 0.7% in December while Personal Income grew 0.3%, pointing to strong demand from US consumers.
  • This comes on top of the stronger US Q4 GDP print earlier last week and suggested that the economy is still in good shape, further fuelling optimism about a soft landing.
  • A modest decline in the US Treasury bond yields keeps a lid on any further gains for the Greenback and might continue to act as a tailwind for the non-yielding yellow metal.
  • Traders might also prefer to wait for the FOMC meeting starting on Tuesday and this week's key US macro data, including the Nonfarm Payrolls (NFP) report on Friday.

Technical Analysis: Gold price could appreciate further once the $2,040-2,042 barrier is broken decisively

From a technical perspective, any subsequent move beyond the 50-day SMA hurdle, currently around the $2,027-2,028 region, might continue to attract some sellers near the $2,040-2,042 supply zone. A sustained strength beyond the latter could trigger a short-covering rally and lift the Gold price further to the $2,077 intermediate hurdle en route to the $2,100 round-figure mark.

On the flip side, immediate support is pegged near the $2,012-2,010 area ahead of the $2,000 psychological mark. Some follow-through selling will be seen as a fresh trigger for bearish traders and expose the 100-day SMA, currently near the $1,977-1,976 area. The Gold price could eventually drop to test the very important 200-day SMA, near the $1,964-1,963 region.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Euro.

USD   -0.03% -0.08% -0.07% -0.26% -0.06% -0.13% -0.11%
EUR 0.03%   -0.04% -0.03% -0.22% -0.01% -0.10% -0.08%
GBP 0.08% 0.04%   0.00% -0.18% 0.03% -0.06% -0.03%
CAD 0.06% 0.02% -0.02%   -0.19% 0.02% -0.06% -0.04%
AUD 0.25% 0.19% 0.16% 0.17%   0.18% 0.11% 0.15%
JPY 0.06% 0.02% 0.13% -0.01% -0.18%   -0.10% -0.05%
NZD 0.13% 0.10% 0.06% 0.06% -0.11% 0.05%   0.02%
CHF 0.10% 0.06% 0.03% 0.04% -0.13% 0.05% -0.01%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Economic Indicator

United States Fed Monetary Policy Statement

Following the Federal Reserve's (Fed) rate decision, the Federal Open Market Committee (FOMC) releases its statement regarding monetary policy. The statement may influence the volatility of the US Dollar (USD) and determine a short-term positive or negative trend. A hawkish view is considered bullish for USD, whereas a dovish view is considered negative or bearish.

Read more.

Next release: 01/31/2024 19:00:00 GMT

Frequency: Irregular

Source: Federal Reserve

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