Gold struggles near multi-day low, downside seems cushioned amid Fed rate cut bets

• Gold price corrects further from the record high amid some follow-through USD buying.
• September Fed rate cut bets should cap the USD and help limit losses for the XAU/USD.
• The technical setup supports prospects for the emergence of dip-buying near $2,400.

Gold price (XAU/USD) maintains its offered tone through the Asian session on Friday and is currently placed near a multi-day low, around the $2,425 region. The US Dollar (USD) builds on the previous day’s solid recovery from a four-month low and turns out to be a key factor dragging the commodity lower for the third successive day. Apart from this, some profit-taking, especially after the recent rally of over 6.5% since the beginning of this month, further contributes to the decline, though the downside seems limited. 

Investors now seem convinced that the Federal Reserve (Fed) will start lowering borrowing costs in September and have been pricing in the possibility of two more rate cuts by year end. This keeps the US Treasury bond yields on the defensive and should cap the USD. Apart from this, the risk-off mood could lend support to the safe-haven Gold price. Furthermore, geopolitical tensions and central bank demand should help limit any meaningful depreciating move for the non-yielding yellow metal. 

Daily Digest Market Movers: Gold price remains depressed amid a further USD recovery

• The US Dollar builds on the previous day’s strong recovery from its lowest level since March 21 and drags the Gold price lower for the third successive day on Friday. 
• The US Bureau of Labor Statistics (BLS) reported on Thursday that the number of Americans filing for unemployment benefits in the week ending July 13 rose to 243K.
• Additional details of the report revealed that the 4-week moving average swelled to the highest level in more than 2-1/2 years, pointing to a loosening labor market.
• This, along with ebbing inflation, paves the way for an imminent start of the Federal Reserve’s rate-cutting cycle, offsetting the upbeat US manufacturing data.
• In fact, the Philadelphia Fed Manufacturing Index remained in positive territory for a sixth straight month and rose to 13.9 from 1.3 in the previous month. 
• Nevertheless, the CME Group’s FedWatch Tool indicates that markets are pricing in a 100% chance of a rate-cut in September and an additional two cuts by year-end.
• Meanwhile, former President Donald Trump said that Taiwan should pay the US for defense, raising doubts over the US commitment to defend Taiwan in the event of an attack by China. 
• This comes on top of geopolitical tensions stemming from conflicts in the Middle East and the protracted Russia-Ukraine war, which should lend support to the XAU/USD. 

Technical Analysis: Gold price could accelerate the fall once $2,390-2,385 support is broken

From a technical perspective, any subsequent fall is likely to find decent support near the $2,413-2,412 area ahead of the $2,400 round-figure mark. This is followed by the $2,390-2,385 horizontal resistance breakpoint, now turned support, which, if broken decisively, might prompt some technical selling. The Gold price might then accelerate the downfall toward testing the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,359-2,358 region. Sustained weakness below the latter could expose the 100-day SMA near the $2,311 zone, with some intermediate support near the $2,330-2,328 region. 

On the flip side, the Asian session high, around the $2,445 area, now seems to act as an immediate hurdle, above which the Gold price could climb to the $2,469-2,470 region. Given that oscillators on the daily chart are still holding comfortably in positive territory, bulls might then aim to retest the all-time peak, near the $2,483-2,484 region, and conquer the $2,500 psychological mark.