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Gold price slides below $2,640, fresh daily low ahead of Fed Chair Powell's speech

  • Gold price struggles to capitalize on its modest intraday gains amid bets for a less dovish Fed. 
  • Geopolitical tensions and trade war fears might offer support to the safe-haven precious metal. 
  • Traders now look to Fed Chair Powell's speech for rate-cut cuts and some meaningful impetus.

Gold price (XAU/USD) attracts some sellers following an intraday uptick to the $2,650 supply zone and hits a fresh daily low during the first half of the European session on Wednesday. The precious metal, however, remains confined in a familiar range held over the past week or so as traders seem reluctant to place aggressive directional bets ahead of Federal Reserve (Fed) Chair Jerome Powell's speech. Investors will look for cues about the future rate-cut path, which, in turn, will drive the US Dollar (USD) demand and provide some meaningful impetus to the commodity.

Meanwhile, easing fears of a significant slowdown in the US labor market and expectations that Trump's expansionary policies will boost inflation suggest that the Fed might adopt a cautious stance on cutting rates. The outlook remains supportive of a modest uptick in the US Treasury bond yields, which act as a tailwind for the USD and undermine demand for the non-yielding Gold price. That said, persistent geopolitical tensions, worries about US President-elect Donald Trump's tariff plans and political turmoil in South Korea should limit losses for the safe-haven XAU/USD

Gold price is undermined by uptick in US bond yields, bets for slower Fed rate cuts

  • Traders now seem reluctant to place aggressive directional bets around the Gold price and await Federal Reserve Chair Jerome Powell's speech for cues about the interest rate outlook. 
  • A survey (JOLTS) published by the US Bureau of Labor Statistics (BLS) on Tuesday showed that the number of job openings increased solidly from 7.37 million to 7.74 million in October. 
  • The strong US labor market report comes on top of stalling progress in lowering inflation to the 2% target and suggests that the US central bank could pause its rate-cutting cycle next year. 
  • The prospects for a less dovish Fed remain supportive of a modest uptick in the US Treasury bond yields, though does little to impress the US Dollar bulls or provide any meaningful impetus.
  • According to the CME Group's FedWatch Tool, the markets are still pricing over a 70% chance that the Fed will cut rates by 25 basis points at its upcoming meeting in December. 
  • San Francisco Fed President Mary Daly said that the US economy is in a good place the balanced labor market is not a source of inflation and that the December rate cut is not off the table.
  • Fed Governor Adrianna Kugler noted that the progress on inflation is still underway and the central bank will make decisions meeting by meeting and that the policy is not on a preset course.
  • Chicago Fed President Austan Goolsbee said that rates remain restrictive and need to come down a fair amount from where they are now over the next year if inflation gets close to the target.
  • US President-elect Donald Trump pledged to impose big tariffs against America’s three biggest trading partners – Mexico, Canada and China – and also threatened a 100% tariff on 'BRICS' nations. 
  • Israel carried out its biggest wave of air strikes since the truce agreement with Lebanon in retaliation to the firing of two rockets at Israeli-occupied territory by the Iran-backed group Hezbollah. 
  • China's Caixin Services Purchasing Managers' Index (PMI) unexpectedly fell to 51.5  in November from 52.0, fueling worries about a fragile recovery in the world's second-largest economy.

Gold price repeated failures near $2,650 supports prospects for further losses

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From a technical perspective, the recent range-bound price action might still be categorized as a bearish consolidation phase against the backdrop of last week's decline. Adding to this, this week's breakdown below a four-day-old ascending channel favors bearish traders. That said, neutral oscillators on the daily chart suggest that any further slide below the overnight swing low, around the $2,622-2,621 area, might continue to find some support near the $2,600 mark. Some follow-through selling, meanwhile, might expose the 100-day Simple Moving Average (SMA), currently around the $2,579-2,78 zone, below which the Gold price could retest the November monthly trough, around the $2,537-2,536 region.

On the flip side, the $2,655 area, followed by the $2,666 region might act as immediate strong barriers. The next relevant hurdle is pegged near the $2,677-2,678 zone, above which the Gold price could aim to reclaim the $2,700 round figure. Any further move up is likely to confront stiff resistance near the $2,721-2,722 supply zone. A sustained strength beyond the latter might shift the bias in favor of bullish traders and pave the way for some meaningful appreciating move in the near term.

Economic Indicator

Fed's Chair Powell speech

Jerome H. Powell took office as a member of the Board of Governors of the Federal Reserve System on May 25, 2012, to fill an unexpired term. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chairman of the Federal Reserve. Powell assumed office as Chair on February 5, 2018.

Read more.

Next release: Wed Dec 04, 2024 18:45

Frequency: Irregular

Consensus: -

Previous: -

Source: Federal Reserve

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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