Gold price regains positive traction on Tuesday, though the upside potential seems limited.

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• Gold price regains positive traction on Tuesday, though the upside potential seems limited.
• Geopolitical risks and China’s economic woes lend some support to the safe-haven XAU/USD.
• Reduced bets for an early rate cut by the Fed should cap any meaningful appreciating move.

Gold price (XAU/USD) attracts some dip-buying during the Asian session on Tuesday and recovers a major part of the overnight modest losses. Geopolitical tensions in the Middle East, along with concerns over China’s weak economic recovery, lend some support to the safe-haven precious metal. The upside, however, remains capped as investors continue to roll back expectations for a more aggressive policy easing by the Federal Reserve (Fed), which could undermine the non-yielding yellow metal. Apart from this, the risk-on environment might further contribute to capping any meaningful appreciating move for the bullion ahead of this week’s key central bank event risks, especially the European Central Bank (ECB) monetary policy meeting on Thursday.

Traders this week will also confront the release of global flash PMIs on Wednesday, which will be followed by the Advance US Q4 GDP print and the US Core PCE Price Index on Thursday and Friday, respectively. This, in turn, should provide a fresh directional impetus to the Gold price. In the meantime, a shift in expectations in the wake of the recent hawkish comments by several Fed officials, noting that it was too early to consider interest rate cuts, suggests that the path of least resistance for the XAU/USD is to the downside. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

From a technical perspective, any subsequent move up beyond the $2,030 area is likely to confront stiff resistance near the $2,040-2,042 supply zone. The latter should act as a key pivotal point, which if cleared decisively could trigger a short-covering rally. The Gold price might then climb to the $2,077 area before aiming to reclaim the $2,100 round-figure mark.

On the flip side, the overnight swing low, around the $2,017-2,016 region, now seems to protect the immediate downside ahead of the $2,000 psychological mark, or over a one-month low touched last week. A sustained break below the latter could make the Gold price vulnerable to accelerate the fall towards the $1,988 intermediate support. The downward trajectory could extend further towards the 100-day Simple Moving Average (SMA), currently around the $1,972 area and the 200-day SMA, near the $1,964-1,963 zone.

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