- Gold price catches fresh bids on Tuesday amid the emergence of fresh US Dollar selling.
- Bets for less aggressive rate hikes by the Federal Reserve continue to weigh on the USD.
- A positive risk tone seems to keep a lid on any further gains for the safe-haven XAU/USD.
Gold price regains positive traction on Tuesday and reverses the previous day's retracement slide from more than a one-week high. The XAU/USD maintains its bid tone heading into the North American session and trades near the top end of its daily range, around the $1,755 region.
Renewed US Dollar selling benefits Gold price
The US Dollar fails to capitalize on the overnight bounce from a technically significant 200-day Simple Moving Average (SMA) amid expectations for a less aggressive policy tightening by the Federal Reserve. The emergence of fresh selling around the Greenback turns out to be a key factor driving flows towards the US Dollar-denominated Gold price.
Expectations for a dovish Federal Reserve weigh on US Dollar
The minutes of the November Federal Open Market Committee (FOMC) meeting released last week cemented bets for a relatively smaller 50 bps rate hike in December. This is reinforced by sliding US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond languishes near a two-month low and continues to weigh on the US Dollar.
Upside potential for Gold price seems limited
That said, the overnight hawkish remarks by Federal Reserve officials should limit the downside for the US bond yields and the US Dollar. In fact, St. Louis Fed President James Bullard, New York Fed President John Williams and Fed Vice Chair Lael Brainard stated that more rate hikes were warranted and there was a long way to go to fight inflation.
Apart from this, a modest recovery in the global risk sentiment, as depicted by a stable performance in the equity markets, might also contribute to capping the safe-haven Gold price. Investors turned optimistic amid speculation that the Chinese government is considering scaling back its strict anti-COVID policies to prevent more protests.
The mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for any further appreciating move for Gold price. Market participants now look to the release of the Conference Board's US Consumer Confidence Index. This, along with the US bond yields, will influence the USD and provide a fresh impetus to Gold price.
The focus, however, will remain on Fed Chair Jerome Powell's speech on Wednesday. Investors will be seeking more clarity on the central bank’s policy stance and future rate hikes. Furthermore, this week's important US macro data, including the closely-watched NonFarm Payrolls (NFP) report, should determine the near-term trajectory for Gold price.
Gold price technical outlook
From a technical perspective, any subsequent move up is likely to confront resistance near the $1,770-$1,772 region. A sustained strength beyond will be seen as a fresh trigger for bulls, allowing Gold price to surpass the $1,778 intermediate hurdle and retest the $1,786 area, or its highest level since mid-August touched earlier this month. The momentum could further get extended and assist the XAU/USD to reclaim the $1,800 psychological mark.
On the flip side, the $1,740-$1,739 region now seems to have emerged as immediate strong support ahead of the $1,736-$1,735 region and the $1,725 zone, or a nearly two-week low touched last Wednesday. Failure to defend the said support levels might negate the positive outlook and prompt some technical selling, dragging Gold price further towards the $1,700 round-figure mark.
Key levels to watch
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