Gold price bulls look to seize control near two-week high ahead of FOMC minutes

• Gold price catches fresh bids on Tuesday as dovish Fed expectations continue to weigh on the USD.
• The upbeat market mood also does little to hinder the positive move back closer to a two-week high.
• Investors now look to the crucial FOMC meeting minutes for future policy action and a fresh impetus.

Gold price (XAU/USD) builds on the overnight bounce from the $1,966-1,965 area and gains strong positive traction during the Asian session on Tuesday. The recent data from the United States (US) pointed to a slowing jobs market and easing inflationary pressures, fueling speculations that the Federal Reserve (Fed) could begin easing its monetary policy sooner than expected. This is reinforced by a further decline in the US Treasury bond yields, which drags the US Dollar (USD) to its lowest level since August 31 and lifts the non-yielding yellow metal back closer to a two-week peak touched last Friday.

The strong intraday move up, meanwhile, seems rather unaffected by a generally positive risk tone, which tends to undermine the safe-haven Gold price. China’s promise of additional government stimulus measures boosted investors’ confidence and remains supportive of the upbeat market mood, though a bearish USD continues to act as a tailwind for the precious metal. However, it remains to be seen if the XAU/USD is able to capitalize on the momentum ahead of the release of the FOMC meeting minutes, against the backdrop of the uncertainty over the timing of when the Fed will start cutting interest rates.

Daily Digest Market Movers: Gold price jumps back closer to a two-week high touched last Friday amid sustained USD selling

• The US Dollar selling remains unabated in the wake of dovish Federal Reserve expectations and assisted the Gold price to regain strong positive traction on Tuesday.
• Investors now seem convinced that the Fed has completed its interest rate-hiking cycle and are looking for cues on when the central bank could begin easing its monetary policy.
• The rate-sensitive 2-year US government bond yield remains below the current 5.25-to-5.50% Fed funds target, suggesting that momentum in favour of rate cuts is building.
• The CME’s Fedwatch tool points to a roughly 30% chance that the Fed will start cutting rates as soon as March 2024 and a nearly 100 bps of cumulative easing by the year-end.
• The benchmark US 10-year Treasury yield drops to a fresh two-month low and undermines USD, offsetting the upbeat market mood and benefitting the non-yielding yellow metal.
• Investors turned optimistic after  Chinese officials vowed to roll out more policy support for the country’s beleaguered real estate sector and drive stronger momentum for growth.
• China’s new finance minister Lan Fo’an said that the country would boost budget spending to support the post-pandemic recovery in the world’s second-largest economy.
• Fed officials, meanwhile, have not ruled out the possibility that more interest rate hikes could be needed should a change in economic data require it.
• Richmond Fed President Thomas Barkin said on Monday that inflation is likely to remain stubborn and force the central bank to keep rates higher for longer than investors currently anticipate.
• This, in turn, could act as a headwind for the precious metal as traders look to the FOMC minutes for fresh cues about the Fed’s future policy action and some meaningful impetus.

Technical Analysis: Gold price could aim back to retest multi-month peak around $2.009-2,010 region touched in October

From a technical perspective, some follow-through buying beyond last week’s swing high, around the $1,993 area, should allow the Gold price to reclaim the $2,000 psychological mark. The momentum could get extended further towards retesting a multi-month peak, around the $2,009-2,010 area touched in October. A sustained strength beyond the latter will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent goodish rebound from levels just below the 200-day Simple Moving Average (SMA).

On the flip side, the $1,978-1,977 region now seems to protect the immediate downside ahead of the overnight swing low, around the $1,965 zone. Failure to defend the said support levels could make the Gold price vulnerable to accelerate the slide back towards challenging the 200-day SMA, currently near the $1,938-1,937 zone. This is followed by the 100- and the 50-day SMAs confluence, around the $1,930-1,929 area, which if broken decisively will shift the near-term bias in favour of bearish traders and prompt some technical selling.