Gold price extends its consolidative price move near multi-week low, FOMC decision awaited

• Gold price drops to a fresh multi-week low on Wednesday, albeit lacks follow-through.
• Reduced bets for an early rate cut by the Fed continue to undermine the yellow metal.
• Bears now seem reluctant to place fresh bets ahead of the crucial FOMC policy decision.

Gold price (XAU/USD) reverses an early European session dip to over a three-week low and climbs back above the $1,982 level in the last hour. Any meaningful appreciating move, however, still seems elusive amid the uncertainty over the Federal Reserve’s (Fed) near-term policy outlook, which might hold back traders from placing aggressive directional bets. Hence, the focus will remain glued to the outcome of the highly-anticipated FOMC policy meeting, scheduled to be announced later today. 

In the meantime, a stick inflation report from the United States (US) released on Tuesday, along with Friday’s mostly upbeat employment details, forced traders to bet that it could take the Fed until May to begin a series of interest-rate cuts next year. This, in turn, assists the US Dollar (USD) to regain positive traction and should act as a headwind for the non-yielding Gold price. Apart from this, the risk-on environment might further contribute to capping gains for the safe-haven precious metal.

Meanwhile, concerns about weak economic growth in China, along with a further escalation of geopolitical tensions in the Middle East, assist the Gold price to hold above the 50-day Simple Moving Average (SMA). The aforementioned mixed fundamental backdrop warrants some caution before positioning for a firm near-term direction. That said, the lack of buying interest supports prospects for an extension of the recent sharp pullback from the record peak touched this month. 

Daily Digest Market Movers: Gold price is undermined by reduced bets for a dovish Fed pivot

• The uncertainty over the Federal Reserve’s near-term policy outlook holds back traders from placing directional bets around the Gold price and leads to subdued range-bound price action.
• Data released from the United States on Tuesday showed that consumer prices rose unexpectedly in November, forcing traders to further scale back bets for a rate cut in March.
• The US Labor Department reported that the headline Consumer Price Index (CPI) edged up 0.1% in November and the yearly rate ticked down to 3.1% from the 3.2% previous.
• The annual Core CPI inflation, which excludes volatile food and energy prices, held steady at 4.0% as forecast and rose 0.1% on a monthly basis, little changed from the previous month.
• The November numbers were still well above the Fed’s 2% target and come on top of the stronger-than-expected US jobs report last Friday, pointing to a still resilient economy.
• The market focus remains glued to the outcome of the crucial two-day FOMC monetary policy meeting, scheduled to be announced later during the US session this Wednesday.
• Investors will look for fresh cues about the timing of when the Fed may start cutting rates in 2024, which, in turn, will drive the US Dollar demand and influence the yellow metal.
• Hopes for more stimulus from policymakers in China overshadow the risk of a further escalation of geopolitical tensions in the Middle East and remain supportive of the risk-on mood.
• Reporting on the annual Central Economic Work Conference that ended on Tuesday, state media said that China will step up policy adjustments to support economic recovery in 2024.
• A senior Communist Party official said on Wednesday that China should set its 2024 fiscal deficit and special local government bonds at appropriate levels and optimise the structure of fiscal spending.
• Yemen’s Iran-backed Houthi rebels issue regulations for navigating through the Red Sea amid the Israel embargo and the warning includes a restriction on travel towards “Occupied Palestinian territories”.
• The US on Tuesday imposed new sanctions on more than 250 individuals and entities in an effort to crack down on Russia’s evasion of sanctions imposes after its invasion on Ukraine.
• This, however, does little to temper investors’ appetite for perceived riskier assets or dampen the underlying bullish market sentiment and benefit the safe-haven precious metal.

Technical Analysis: Gold price manages to defend 50-day SMA support, for the time being

From a technical perspective, the Gold price, so far, has managed to defend the 50% Fibonacci retracement level of the October-December rally to an all-time peak. This is closely followed by the 50-day Simple Moving Average (SMA), currently around the $1,969-1,968 region, below which the XAU/USD could slide to test the very important 200-day SMA, near the $1,953-1,952 area. The next relevant support is pegged near the $1,942-1,938 confluence, comprising the 100-day SMA and the 61.8% Fibo. level, which should act as a key pivot point. A convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for a deeper corrective slide.

On the flip side, any meaningful recovery attempt might continue to attract some sellers near the $2,000 psychological mark and remain capped near the $2,010-2,012 static resistance. Some follow-through buying has the potential to lift the Gold price further towards the $2,030 hurdle en route to the $2,040 supply zone. The subsequent move-up will shift the near-term bias in favour of bullish traders against the backdrop of the occurrence of a golden cross, with the 50-day rising above the 200-day SMA. The XAU/USD might then climb to the $2,071-2,072 region before aiming to reclaim the $2,100 round figure.