Gold price remains depressed below monthly peak, looks to US PPI for some impetus

• Gold price pulls back from the vicinity of the monthly peak retested earlier this Tuesday.
• Bulls opt to lighten their bets amid a positive risk tone and ahead of the US inflation data.
• Geopolitical risks and bets for a 50-bps rate cut by the Fed should help limit the downside.

Gold price (XAU/USD) struggles to capitalize on the previous day’s strong move-up of more than 1% and attracts some intraday sellers in the vicinity of the monthly peak retested during the Asian session on Tuesday. The downtick could be attributed to some repositioning trade ahead of the crucial US inflation figures and a positive risk tone, which tends to undermine demand for the safe-haven precious metal.

That said, rising geopolitical tensions in the Middle East and concerns about a broader conflict in the region might keep a lid on the market optimism. This, along with dovish Federal Reserve (Fed) expectations, which keeps the US Dollar (USD) bulls on the defensive, should offer some support to the non-yielding Gold price. Traders now look forward to the US Producer Price Index (PPI) for some meaningful impetus. 

Daily Digest Market Movers: Gold price is pressured by receding safe-haven demand, ahead of US inflation data

• Israel stepped up its operations near the southern Gaza city of Khan Younis on Monday amid the risk of a broader conflict in the Middle East, boosting demand for the safe-haven Gold price. 
• Israel is also preparing for the possibility of an imminent attack by Iran and the Lebanese group Hezbollah in retaliation for the assassination of Hamas leader Ismail Haniyeh in Tehran in late July. 
• Russian President Vladimir Putin told Ukraine to expect a worthy response to its recent cross-border incursion into western parts of the Kursk region, which was about 12 km deep and 40 km wide.
• This comes on top of market expectations for a bigger, 50 basis points interest rate cut by the Federal Reserve in September and continues to act as a tailwind for the non-yielding yellow metal.
• The upside for the XAU/USD, however, remains capped in the wake of a positive risk tone and as traders opt to move to the sidelines ahead of the critical US inflation figures. 
• The US Producer Price Index (PPI) is due on Tuesday, followed by the US Consumer Price Index (CPI) on Wednesday and should provide fresh cues about the Fed’s policy path. 
• The readings are expected to show that inflation cooled in July, giving the US central bank headroom to start its policy-easing cycle, supporting prospects for further gains for the commodity.

Technical Analysis: Gold price bulls have the upper hand, the overnight break through $2,448-2,450 hurdle in play

From a technical perspective, the overnight breakout through the $2,448-2,450 horizontal resistance was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and further suggest that the path of least resistance for the Gold price is to the upside. Hence, a subsequent move back towards challenging the record high, around the $2,483-2,484 area, looks like a distinct possibility. This is followed by the $2,500 psychological mark, which if cleared decisively will set the stage for an extension of the upward trajectory.

On the flip side, the $2,450-2,448 resistance breakpoint now seems to protect the immediate downside, below which the Gold price could slide back to the overnight swing low around the $2,424-2,423 region. The next relevant support is pegged near the $2,412-2,410 area ahead of the $2,400 round-figure mark. A convincing break below could expose the 50-day Simple Moving Average (SMA) support near the $2,376-2,375 region, which should act as a key pivotal point. Some follow-through selling could drag the Gold price to the late July low, around the $2,353-2,352 area. The latter coincides with the 100-day SMA and a sustained weakness below will shift the near-term bias in favor of bearish traders.

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