Gold remains depressed near one-week low; bears await break below $4,000
- Gold attracts sellers for the fourth straight day amid reduced December Fed rate cut bets.
- Economic concerns weigh on the USD, though it fails to offer support to the commodity.
- Even the risk-off impulse does little to benefit the safe-haven XAU/USD pair or limit losses.
Gold (XAU/USD) prolongs its downtrend for the fourth straight day and drops to an over one-week low on Tuesday, though it manages to defend the $4,000 psychological mark through the Asian session. Traders have been scaling back their bets for another interest rate cut by the US Federal Reserve (Fed) in December, which, in turn, is seen as a key factor undermining the non-yielding yellow metal.
Meanwhile, the US Dollar (USD) struggles to attract any follow-through buying amid concerns about the weakening economic momentum on the back of the longest-ever US government shutdown. This, along with the prevalent risk-off environment, helps limit losses for the safe-haven Gold. Traders also seem reluctant ahead of the FOMC Minutes and the delayed release of the US Nonfarm Payrolls (NFP) this week.
Daily Digest Market Movers: Gold bears retain short-term control amid reduced Fed rate cut bets
- The longest-ever US government shutdown led to an absence of official economic data and dampened expectations for another interest rate cut by the Federal Reserve in December. Moreover, several Fed officials recently signaled caution on further policy easing.
- Fed Vice Chair Philip Jefferson said on Monday that upside risks to inflation have declined somewhat and the current policy rate is somewhat restrictive. Jefferson, however, added that the central bank needs to proceed slowly as monetary policy approaches the neutral rate.
- According to the CME Group’s FedWatch Tool, the probability for a 25 basis-point Fed rate cut in December has now fallen below 50%. This, in turn, has been a key factor that continues to drive flows away from the non-yielding Gold for the fourth consecutive day on Tuesday.
- Meanwhile, investors remain worried about the impact of the prolonged US government closure on the economy, which fails to assist the US Dollar in building on the previous day’s gains. This might hold back the XAU/USD bears from placing aggressive bets and help limit losses.
- The reopening of the US government shifts the market focus back to the release of delayed economic data, including the key Nonfarm Payrolls (NFP) report on Thursday. Apart from this, the FOMC Minutes could offer cues about the rate-cut path and influence the commodity.
- Russia’s Defence Ministry said that its forces have occupied strongholds in Orestopol in the Dnipropetrovsk region. Moreover, a Russian attack forced a Romanian border village to evacuate. This keeps geopolitical risks in play and could support the safe-haven precious metal.
Gold needs to find acceptance below $4,000 psychological mark to back the case for any further losses
The XAU/USD pair recently failed to move back above the 200-hour Exponential Moving Average (EMA). The subsequent fall favors bearish traders and suggests that the path of least resistance for the Gold price is to the downside. Some follow-through selling below the $4,000 mark will reaffirm the negative bias and make the commodity vulnerable to accelerate the fall towards the $3,931 intermediate support en route to the $3,900 mark and late October swing low, around the $3,886 region.
On the flip side, any meaningful recovery attempt might now confront an immediate strong barrier near the $4,053-4,055 region. However, a sustained strength beyond could trigger a short-covering rally and lift the Gold price back to the 200-hour EMA, currently pegged just below the $4,100 round figure. Some follow-through buying will suggest that the recent slide witnessed over the past week or so, from the vicinity of mid-$4,200s, has run its course and pave the way for additional gains.
