Gold flat lines above one-week low as upbeat market mood offsets Fed rate cut bets

• Gold lacks a firm intraday direction amid mixed fundamental cues.
• The US CPI lifts Fed rate cut bets and weighs on USD, lending support.
• The upbeat market mood caps the upside for the safe-haven commodity.

Gold (XAU/USD) struggles to capitalize on the previous day’s bounce from the $3,331 area, or a one-and-a-half-week low, and oscillates in a narrow range during the Asian session on Wednesday. The broadly in-line July US consumer inflation figures released on Tuesday reinforced bets that the Federal Reserve (Fed) will lower borrowing costs at the upcoming monetary policy meeting in September. This keeps the US Dollar (USD) on the defensive and turns out to be a key factor acting as a tailwind for the non-yielding yellow metal.

However, the underlying bullish sentiment, bolstered by an extension of the US-China trade truce and the US-Russia summit aimed at ending the war in Ukraine, keeps a lid on the safe-haven Gold. This, along with the recent repeated failures to find acceptance above the $3,400 round figure, makes it prudent to wait for strong follow-through buying before confirming that the XAU/USD pair has formed a near-term bottom. Traders now look to speeches from influential FOMC members for short-term impetuses later this Wednesday.

Daily Digest Market Movers: Gold struggles to lure buyers amid receding safe-haven demand

• The US Bureau of Labor Statistics reported on Tuesday that the headline Consumer Price Index (CPI) remained unchanged at 2.7% on a yearly basis in July. However, the core gauge, which excludes food and energy prices, came in above market estimates and increased to the 3.1% YoY rate from the 2.9% in June.
• On a monthly basis, the CPI and the core CPI rose by 0.2% and 0.3%, respectively, matching expectations. Nevertheless, the data alleviated concerns that trade-related costs might contribute to broader price pressures and keep a September rate cut by the Federal Reserve on the table, amid signs of labor market weakness.
• Moreover, CME Group’s FedWatch Tool indicates that traders are pricing in the possibility that the US central bank will lower borrowing costs at least twice by the year-end. This keeps the US Dollar depressed near the post-US CPI swing low and acts as a tailwind for the non-yielding Gold on Wednesday.
• On the trade-related front, US President Donald Trump signed an executive order on Monday extending a tariff truce with China for another three months. This helped to ease concerns about a trade war between the world’s two largest economies and remains supportive of the upbeat market mood amid hopes that the upcoming US-Russian summit on Friday will increase the chances of ending the prolonged war in Ukraine.
• The S&P 500 and the Nasdaq posted record closing highs on Tuesday, while Japan’s Nikkei 225 reached the 43,000 mark for the first time ever on Wednesday. This is seen undermining traditional safe-haven assets and might hold back the XAU/USD bulls from placing aggressive bets. In the absence of any relevant market-moving macro data from the US, traders will take cues from Fed speakers to grab short-term opportunities.
• The market attention will then shift to the release of the US Producer Price Index (PPI) on Thursday and the Preliminary University of Michigan US Consumer Sentiment Index on Friday. Nevertheless, the mixed fundamental backdrop warrants some caution before positioning for any further appreciating move.

Gold price bears await break and acceptance below 200-SMA pivotal support on H4

From a technical perspective, the XAU/USD pair, barring the previous day’s knee-jerk downward spike, has been oscillating in a familiar band since the early part of this week. The range-bound price action might still be categorized as a bearish consolidation phase against the backdrop of the recent sharp retracement slide from levels just above the $3,400 mark. Moreover, negative oscillators on hourly/daily charts suggest that the path of least resistance for the Gold is to the downside. That said, it will still be prudent to wait for acceptance below the $3,243-3,242 region (200-period SMA on H4) before positioning for a fall to the $3,300 round figure.

On the flip side, the $3,358-3,360 supply zone now seems to have emerged as an immediate strong barrier. A sustained move beyond has the potential to lift the XAU/USD pair to the $3,380 area en route to the $3,400 mark. Some follow-through buying beyond last week’s swing high, around the $3,409-3,410 area, would be seen as a fresh trigger for the Gold bulls and pave the way for a move towards the next relevant hurdle near the $3,422-3,423 area. The momentum could extend further towards the $3,434-3,435 horizontal resistance, above which the commodity might aim towards challenging the all-time peak, around the $3,500 psychological mark touched in April.