Gold price builds on the overnight bounce from a one-month low amid a softer USD.

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• Gold price builds on the overnight bounce from a one-month low amid a softer USD.
• Despite a slightly hot US CPI, bets for a March Fed rate cut undermine the Greenback.
• Geopolitical risks and China’s economic woes further benefit the safe-haven XAU/USD.

Gold price (XAU/USD) attracts some buyers for the second successive day on Friday and builds on the overnight bounce from a one-month low, around the $2,013 region, representing the 50-day Simple Moving Average (SMA). The precious metal, however, remains confined in a multi-day-old trading range, warranting some caution for bullish traders amid the uncertainty over the Federal Reserve’s (Fed) rate-cut path.

Data released on Thursday showed consumer prices in the United States (US) increased more than expected in December. This, along with hawkish remarks from Fed officials, fuelled speculations that interest rates could stay higher for longer. The markets, however, are pricing in a greater chance of a rate cut in March, which continues to undermine the US Dollar (USD) and lends support to the non-yielding Gold price.

Apart from this, geopolitical risks stemming from the Israel-Hamas war and persistent worries about a slow economic recovery in China further seem to benefit the safe-haven XAU/USD. That said, the aforementioned fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the Gold price has formed a near-term bottom and positioning for any meaningful appreciating move.

From a technical perspective, the overnight bounce from the 50-day SMA and the subsequent move up as well as positive oscillators on the daily chart favour bullish traders. That said, it will still be prudent to wait for a sustained strength beyond the $2,040-2,042 supply zone before positioning for additional gains. The Gold price might then accelerate the momentum towards last Friday’s swing high, around the $2,064 area, en route to the $2,077 area. Some follow-through buying will negate any near-term negative outlook and set the stage for a move towards reclaiming the $2,100 round figure.

On the flip side, the $2,022 area now seems to protect the immediate downside ahead of the multi-week low, around the $2,013 region, or the 50-day SMA tested on Thursday. A convincing break below the latter will be seen as a fresh trigger for bearish traders and drag the Gold price to the $2,000 psychological mark. The downward trajectory could extend further towards the December swing low, around the $1,973 region before the XAU/USD eventually drops to the $1,965-1,963 confluence, comprising the 100- and 200-day SMAs.

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