Buyers have shown interest in gold (XAUUSD) in the intraday chart, breaking a two-day losing trend. However, it remains below the most recent multi-week high documented last Thursday. This correction happens amidst a comparatively lower trading volume on the first trading day of 2024.
A Rate Cut Knocks
As a result of an increase in US Treasury bond yields, the US Dollar Index (DXY) is experiencing a gradual recovery from a five-month low, marking its third consecutive day of recovery. However, this increase presents a difficulty for commodities such as gold. Despite this, consensus is building that the Federal Reserve (Fed) will initiate interest rate cuts in the near future. This outlook supports bullish speculators and enhances the likelihood of additional profits in the gold market.
Throughout 2024, investors anticipate a series of interest rate cuts from the US central bank. Following a decline in the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of inflation, these expectations grabbed traction. These elements with a robust U.S. economy indicate a seamless economic transition, empowering the Federal Reserve to commence policy adjustments earlier.
According to the FedWatch tool by CME Group, the possibility of a rate cut at the March meeting is 85%, with a cumulative rate cut of 150 basis points (bps) by the end of the year. This forecast will probably impede the ascent of US bond yields and dampen bullish sentiment towards the USD, thereby confirming a positive outlook for gold.
NFP In Focus
Overall, geopolitical tensions and direct acquisitions by central banks suggest that an upward trajectory is the most probable for the XAU/USD. Yet, traders may exercise caution before releasing the monthly employment report (NFP), which is closely anticipated and scheduled for Friday.
Moreover, on Wednesday, the publication of the FOMC meeting minutes is expected to substantially impact the USD's dynamics and propel gold, a non-yielding asset, to considerable momentum.
XAUUSD Technical Analysis
In the daily chart of gold price, the overall market trend is bullish, supported by the upward dynamic 20-day EMA. Moreover, a stable market is visible above the 2047.70 event level, which is the immediate static support.
Investors might expect a corrective price action until the NFP releases as it is the beginning of a new trading session. However, a downside correction from the 2088.59 resistance level is possible, where the 20-day EMA would be the first target.
On the bullish side, a stable market above the 2089.00 level with a consolidation could be a potential long opportunity, which could initiate a bull run above the 2100.00 level.
