Gold price has extended its recovery to near $2,030 as the US Dollar turns sideways.

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• Gold price has extended its recovery to near $2,030 as the US Dollar turns sideways.
• A pullback move in the Gold price is less convincing as traders have pared bets for a Fed rate cut in March.
• Upbeat US Retail Sales numbers signal upside risks to US inflation.

Gold price (XAU/USD) rises further on Friday’s European session as the appeal for safe-haven assets improves due to the deepening Middle East conflict. Adding to the war in Gaza, tensions between Houthi rebels and the United States military are increasing in the key commercial shipping route crossing the Red Sea. Moreover, Pakistan carried out military strikes in Iran on Thursday following a similar attack by Iran in its territory.

In this context, the precious metal has recovered significantly, but the outlook in the near term has not turned bullish as further upside looks capped by diminishing bets supporting an interest-rate cut from the Federal Reserve (Fed.)

The outlook for inflation in the United States remains uncertain. Price growth is gradually declining, but recent data suggests that the economy is strong, particularly due to robust household spending. This adds to inflation pressures and makes it more likely that the Fed will maintain a restrictive monetary policy stance for a longer period.

The Fed is expected to keep interest rates unchanged in the range of 5.25%-5.50% for the fourth consecutive time at the monetary policy meeting on January 31. Market participants will focus on the commentary about how the Fed will fit the expected three interest rate cuts in the remaining seven policy meetings of 2024.

Gold price jumped to near $2,030 on Friday. The precious metal recovered strongly after finding buying interest near the psychological support of $2,000. The yellow metal rebounded after taking support from the 50-day Exponential Moving Average (EMA), which trades around $2,017. However, the 20-day EMA near $2,035 is still acting as a barrier for the Gold price bulls. The 14-period Relative Strength Index (RSI) rebounded after testing territory near 40.00.

More upside could appear if Gold manages to stabilize above the $2,030 resistance, while the downside move could gain traction on a breakdown below the psychological supportof $2,000.

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