Gold retains negative bias as traders await Fed's Powell; $4,000 holds the key for bulls

Gold (XAU/USD) remains on the back foot through the first half of the European session on Thursday, though it manages to hold above the $4,000 psychological mark amid mixed fundamental cues. The Israel-Hamas agreement to the first phase of the peace deal helps ease some of the geopolitical tensions and prompts profit-taking around the safe-haven precious metal amid still overbought conditions. Furthermore, the US Dollar (USD) builds on its weekly uptrend and climbs to the highest level since early August, which turns out to be another factor undermining the commodity.

However, dovish Federal Reserve (Fed) expectations continue to act as a tailwind for the non-yielding Gold and help limit the downside. Apart from this, concerns that a prolonged US government shutdown could affect the economic performance offer some support to the safe-haven XAU/USD. This, in turn, makes it prudent to wait for strong follow-through selling before confirming that the bullion has topped out in the near term and positioning for any meaningful corrective decline. Traders now look to Fed Chair Jerome Powell's speech for short-term opportunities.

Daily Digest Market Movers: Gold is undermined by a firmer USD, reduced safe-haven buying

• US President Donald Trump said Wednesday that Israel and Hamas had agreed on the first phase of his 20-point Gaza peace plan after talks in Egypt. The development prompts bullish traders to take some profits off the table and weighs on the safe-haven Gold during the Asian session on Thursday.
• Minutes from the Federal Reserve’s September meeting released on Wednesday indicated near unanimity among participants to lower interest rates amid concern about labour market risks. Policymakers, however, remained split on whether there should be one or two more rate reductions before the year-end.
• According to the CME FedWatch tool, the possibility of a 25-basis-point interest rate cut by the Fed in October and December stands at around 93% and 79%, respectively. Moreover, the US government shutdown enters its ninth day, which keeps a lid on the US Dollar and acts as a tailwind for the commodity.
• The Senate, once again, failed to advance funding bills to end the government shutdown for the sixth time on Wednesday amid few signs of progress towards a deal as Democrats and Republicans traded blame for the impasse. Moreover, furloughing of federal workers presents risks for the US labor market.
• A senior Russian lawmaker warned on Wednesday that Moscow will shoot down Tomahawk cruise missiles and bomb their launch sites if the United States decides to supply them to Ukraine. This keeps geopolitical risks in play and should contribute to limiting the corrective slide for the precious metal.
• In the absence of any relevant market-moving economic releases on the back of the US government closure, traders will closely scrutinize Fed Chair Jerome Powell's remarks for cues about the rate-cut path. This will play a key role in influencing the USD and providing a fresh impetus to the XAU/USD pair.

Gold bulls have the upper hand while above the $4,000 psychological mark

From a technical perspective, the Gold price shows resilience below a one-week-old ascending channel support and bounces off the vicinity of the $4,000 psychological mark. Hence, it will be prudent to wait for a sustained break and acceptance below the said handle before positioning for some meaningful corrective decline. The XAU/USD pair might then decline to the next relevant support near the $3,948-3,947 region before eventually dropping to the $3,900 round figure.

On the flip side, momentum back above the $4,035-4,036 region could lift the Gold price beyond the all-time peak, around the $4,059-4,060 area touched on Wednesday, towards testing the ascending channel resistance, currently around the $4,080 zone. Some follow-through buying, leading to a subsequent strength beyond the $4,100 mark, will be seen as a fresh trigger for the XAU/USD bulls and set the stage for an extension of the recent well-established uptrend.