Gold struggle to find traction, appear fragile despite delayed Fed ratecut forecasts.

Gold price (XAUUSD) continued its sideways consolidative price move below the $2,000 psychological level into the European session on Thursday, remaining near a two-month low reached the day before.

Delayed Fed rate drop bets support the USD and act as a headwind for the non-yielding metal.

The growing assumption that the Federal Reserve (Fed) would hold interest rates higher for longer, boosted by the hotter-than-expected US inflation data reported on Tuesday, continues to operate as a headwind for the non-yielding yellow metal. Furthermore, the US Dollar (USD) attracted some dip-buying, halting the overnight drop from its highest level since November 14, further limiting the commodity’s upside potential.

Geopolitical tensions in the Middle East serve to restrict the risk to the safe haven Gold.

However, the USD lacks positive conviction as a result of the continuous corrective decline in US Treasury bond yields. This, together with concerns about geopolitical dangers arising from Middle Eastern wars, provides some support for the safe-haven gold price and urges prudence before putting new bearish wagers. Moving forward, traders will focus on the US economic calendar, which includes the Empire State Manufacturing Index, monthly Retail Sales, the Philadelphia Fed Manufacturing Index, the weekly Initial Jobless Claims, and Industrial Production. Aside from that, US bond yields will drive USD and add some momentum to the XAUUSD.

Daily Market Movers: Diverging forces influence the gold price.

The better US consumer inflation numbers caused investors to reduce expectations on the Federal Reserve’s early rate cuts, underpinning the US Dollar and curbing the upside for the non-yielding gold price.
Fed funds futures have priced out a rate drop in March and expect a roughly 80% chance of lowering at the June meeting, as well as three 25 basis point rate decreases by the end of the year, compared to five two weeks ago.
The US Treasury bond yields fell further on the basis of overnight comments by Chicago Fed President Austan Goolsbee, who said that the central bank should be mindful . It is taking much too long to reduce interest rates.

Goolsbee stated that the Fed’s path back to its 2% inflation objective would remain on track.

Goolsbee stated that the Fed’s path back to its 2% inflation objective would remain on track, even if price increases in the United States were to be slightly higher than predicted in the coming months.
This keeps the Greenback under control, which, combined with the potential of increased geopolitical tensions in the Middle East, offers some support to the safe-haven XAUUSD and helps limit the downside.
The Israeli military announced on Wednesday that its fighter jets had launched a series of strikes in Lebanon in response to a missile fired into Northern Israel, heightening the prospect of a war between the two countries.
Meanwhile, discussions for a cease-fire between Israel and Hamas in Gaza have resumed. The former is under international pressure to halt its bombing of the southern Gaza city of Rafah.
The US Retail Sales numbers for January are set to be released later in the North American session, with consensus expectations pointing to a 0.1% drop from the previous month’s flat reading.
Thursday’s US economic calendar also includes the Empire State Manufacturing Index, the Philadelphia Fed Manufacturing Index, and the weekly initial jobless claims and industrial production statistics.