Gold price rebounds from one-month low amid risk-off impulse; upside seems limited

• Gold price benefits from the global flight to safety amid a sea of red across the equity markets.

• The Fed’s hawkish stance remains supportive of elevated US bond yields and should cap gains.

• Traders now look to the US Q3 GDP for some impetus ahead of the US PCE Price Index on Friday. 

Gold price (XAU/USD) stages a goodish recovery from a one-month trough, around the $2,584-$2,583 region touched during the Asian session on Thursday and for now, seems to have snapped a two-day losing streak. Against the backdrop of geopolitical risks and trade war fears, the Federal Reserve's (Fed) hawkish shift on Wednesday takes its toll on the global risk sentiment. This is evident from a sea of red across the equity markets and turns out to be a key factor driving some haven flows towards the precious metal. 

Meanwhile, the Fed signalled a more cautious path of easing next year, which keeps the US Treasury bond yields elevated near a multi-month top and assists the US Dollar (USD) to preserve its overnight strong gains to a two-year high. This, in turn, might keep a lid on any meaningful upside for the non-yielding Gold price and warrants some caution for bulls. Investors now look to the US economic docket – featuring the final Q3 GDP print and the usual Weekly Initial Jobless Claims – for short-term trading opportunities. 

Gold price attracts some haven flows amid the risk-off impulse; not out of the woods yet

The Federal Reserve, as was anticipated, lowered its benchmark policy rate for the third time since September and signaled that it would slow down the pace of rate cuts, triggering a sell-off in the US equity markets. 

The spillover effect drags Asian stocks sharply lower on Thursday and benefits traditional safe-haven assets, prompting some short-covering around the Gold price and assisting it to rebound from a one-month low. 

The so-called dot plot indicated that officials see the fed funds rate falling to 3.9% in 2025, suggesting two more 25 basis points interest rate reductions as compared to the previous forecast of four cuts in September. 

The yield on the benchmark 10-year US government bond climbs to the highest level since May and assists the US Dollar in preserving the overnight gains to a two-year top, capping the non-yielding yellow metal. 

In his post-meeting press conference, Fed Chair Jerome Powell said that inflation has eased significantly in the past two years, though it remains somewhat elevated relative to the central bank’s 2% longer-run target. 

Traders now look forward to Thursday's US economic docket – featuring the release of the final Q3 GDP print and Weekly Initial Jobless Claims – for short-term impetus later during the North American session.

The market attention, meanwhile, shifts to the US Personal Consumption Expenditures (PCE) Price Index, or the Fed's preferred inflation gauge on Friday, which will drive the USD and the XAU/USD in the near term.

Gold price seems vulnerable after the overnight sustained break and close below the 100-day SMA

From a technical perspective, the overnight close below the 100-day Simple Moving Average (SMA), for the first time since October 2023, and the $2,600 mark was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the Gold price remains to the downside. Meanwhile, Thursday's attempted recovery stalls near the $2,618 region, or the 23.6% Fibonacci retracement level of the latest leg down from over a one-month high touched last week. The said area should now act as a pivotal point, above which a fresh bout of a short-covering could lift the XAU/USD towards the $2,635 area, or the 38.2% Fibo., en route to 50% retracement level, around the $2,655-2,656 supply zone. 

On the flip side, the Asian session low, around the $2,584-$2,583 region, now seems to protect the immediate downside. The next relevant support is pegged near the $2,560 area, below which the Gold price could aim to challenge the November swing low, around the $2,537-$2,535 zone. Some follow-through selling, leading to a subsequent fall below the $2,500 psychological mark, might expose the very important 200-day SMA support near the $2,470 region.