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- Gold price consolidates the previous rebound near $2,030 amid a weaker US Dollar.
- Risks of further geopolitical escalation counter falling March Fed rate cut bets.
- Gold price could stay rangebound due to mixed technical indicators, ahead of US jobs data.
Gold price is treading water near $2,030 early Tuesday, consolidating the previous rebound to a four-day high of $2,038. Gold price is weighing the further escalation in the geopolitical tensions between the Middle East and the United States (US) against the backdrop of reduced bets for a March Federal Reserve (Fed) interest rate cut.
Gold price looks to US JOLTs data for fresh impetus
Amidst the latest development on the Middle East and the US geopolitical conflict, Sky News reported that US President Joe Biden is likely to authorize military action in the Middle East as early as Monday night. This comes in response to the killing of three US service members by an unmanned aerial drone attack on forces stationed in northeastern Jordan near the Syrian border.
Markets stay risk-averse and trade with caution, as they also remain wary amid a deepening real estate crisis fuelled Chinese demand worries, after a Hong Kong court ordered the liquidation of property giant China Evergrande Group on Monday.
The traditional safe-haven, Gold price, draws support from these concerning factors alongside a broad-based US Dollar weakness and the extended selling in the US Treasury bond yields so far in Tuesday’s trading.
On Monday, Gold price staged a solid turnaround and hit multi-day highs above $2,030, capitalizing on a sell-off in the US Treasury bond yields, which limited the US Dollar upside. The US Treasury bond yields tumbled following a sharp rally in the US government bonds after the Treasury cut its first-quarter borrowing estimate. The Treasury Department said Monday it expects to borrow $760 billion in the first quarter, which is $55 billion lower than the October estimate. The decline was driven, in part, by “higher net fiscal flows” and a higher cash balance.
Intensifying Middle East geopolitical tensions also turned in favor of Gold price amid a global flight to safety theme.
Attention now turns toward the US JOLTs Job Openings data for fresh signs on the labor market conditions ahead of Wednesday’s Fed policy announcements and Friday’s Nonfarm Payrolls data release.
Markets are now pricing a 46% probability of a March Fed rate cut while no rate change is expected following this week’s policy meeting. However, comments from Fed Chair Jerome Powell will be closely scrutinized for repricing of the rate cut expectations, having a significant impact on the value of the US Dollar and the Gold price.
The Fed begins its two-day policy meeting on Tuesday, with the verdict likely to be announced on Wednesday.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price is managed to yield a daily closing above $2,030, the intersection of the 50-day Simple Moving Average (SMA) and and the 21-day SMA.
Gold buyers, however, ran into static resistance near the $2,038 level, which capped the upside.
The 14-day Relative Strength Index (RSI) indicator recaptured the midline, providing much-needed support to Gold buyers.
But an impending Bear Cross continues to warrant caution for them, keeping the recovery in check.
The 21-day SMA is on the verge of crossing the 50-day SMA from above, which if happens will confirm the Bear Cross.
Acceptance above the $2,038 barrier will put the psychological $2,050 level back in play. Further up, Gold optimists will target the December 12 high of 2,062.
On the downside, an immediate cushion is seen at the previous day’s low of $2,018, below which the rising trendline support of $2,012 could be threatened.
The next strong downside cap is seen around the $2,000 region.
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