Gold Price Forecast: XAU/USD buyers turn cautious, as full markets return

• Gold price snaps a three-day uptrend near $2,070 early Wednesday.
• The US Dollar finds its feet amid sluggish US Treasury bond yields, a mixed mood.
• Gold price faces a stiff hurdle at $2,079, a brief pullback cannot be ruled out.

Gold price has returned to the red for the first time in four trading days on Wednesday, pulling back slightly from two-week highs of $2,071 set on December 22.

Gold price eyes a fresh catalyst amid thin trading

Gold price is catching a breather, as the US Dollar (USD) is finding its feet due to a cautious market mood, despite a sluggish performance seen in the US Treasury bond yields. Investors catch up on their trades, as well as, on the latest macroeconomic developments following the Christmas holiday break, keeping themselves away from any fresh directional bets.

Additionally, muted activity on the US Federal Reserve (Fed) interest rate cut bets for next year also leaves Gold buyers in limbo. Gold price was on a three-day uptrend, backed by increased expectations of Fed rate cuts in 2024. Markets are currently pricing in a 79% chance of a rate cut starting in March 2024, according to the CME FedWatch tool, with as much as 153 basis points (bps) of cuts priced in for next year.

The dovish sentiment around the Fed policy pivot gathered strength after data from the Commerce Department showed Friday that the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, rose just 0.1% in November and was up 3.2% from a year ago.

The data sent the US Dollar Index to a fresh five-month low of 101.43 while the US Treasury bond yields challenged multi-month lows, with the benchmark 10-year US Treasury bond yields currently gyrating at around 3.85%.

Looking ahead, Gold investors will trade with caution, as full markets return but pre-New Year curtailed week will continue to see muted volumes. Thin liquidity conditions could leave Gold price subject to intense volatility. The US docket on Wednesday will feature the low-impact Richmond Fed Manufacturing Index, with all eyes on the Wall Street sentiment.

Gold price technical analysis: Daily chart

Technically, nothing seems to have changed for the Gold price, as the path of least resistance still appears to the upside.

The 14-day Relative Strength Index (RSI) indicator continues to hold above the midline, backing the bullish potential. However, the latest downtick in the RSI indicator indicates the pullback in Gold price could extend toward the 21-day Simple Moving Average (SMA) at $2,032. Ahead of that, the $2,050 round figure will challenge the bullish commitments.

On the upside, a sustained break above the rising trendline resistance at $2,079 is needed to resume the recovery momentum toward the $2,100 psychological level. Further up, Gold buyers would target the all-time highs of $2,144.