Daily Price Outlook
Despite the overall risk-off sentiment in the market, gold prices (XAU/USD) continue to face pressure, hovering around the 2,704 mark and reaching an intra-day low of 2,703.
This downward movement seems to be linked to the strengthening US dollar, which gained momentum as expectations rise that the Federal Reserve (Fed) will hold off on further rate cuts later this month.
As a result, the dollar's strength is putting downward pressure on gold, which tends to have an inverse relationship with the greenback.
On the other hand, the recent announcement of a ceasefire could help ease geopolitical tensions, reducing the uncertainty that typically drives demand for safe-haven assets like gold. With less fear of conflict, investors may start moving towards riskier assets, further weighing on gold prices.
However, the situation isn’t entirely bleak for gold. The uncertainties surrounding US President-elect Donald Trump's trade policies and tariff plans continue to create potential risks for the global economy.
These factors could provide some support to gold prices, preventing them from falling too drastically. For now, gold seems to be caught between the stronger US dollar and geopolitical risks, leaving investors to navigate these mixed signals.
Impact of Weaker US Data and Fed Expectations on Gold Prices
On the US front, the broad-based US dollar index (DXY), which tracks the USD against six major currencies, ended its four-day losing streak and was trading around 109.10.
However, the dollar faced challenges due to weaker-than-expected US Retail Sales and ongoing inflation concerns, leading to market speculation that the Federal Reserve (Fed) may cut interest rates twice this year. This has put pressure on the Greenback, despite a temporary halt in its decline.
The expectation of interest rate cuts has also caused US Treasury bond yields to drop. The 2-year and 10-year yields are both down, currently at 4.23% and 4.60%, respectively. These yields are on track for a decline of more than 3% this week.
Retail Sales data for December rose by just 0.4% month-over-month, reaching $729.2 billion, falling short of the 0.6% rise that analysts expected.
This weaker data, combined with inflation pressures, has fueled the belief that the Fed may need to reduce rates soon.
Moreover, comments from Chicago Federal Reserve Bank President Austan Goolsbee suggest that the US job market is stabilizing, further supporting the view that the Fed might act cautiously.
The Consumer Price Index (CPI) for December rose 2.9% year-over-year, while the Core CPI, which excludes food and energy prices, increased 3.2%.
Therefore, the weaker US Retail Sales and falling Treasury yields, combined with speculation about Fed rate cuts, support gold prices as a hedge against economic uncertainty. However, stabilizing inflation and a firm US job market may limit gold’s upward momentum.
GOLD (XAU/USD) – Technical Analysis
Gold prices are trading at $2,712.35, down 0.09%, as the metal remains subdued below the pivot point at $2,716.63.
The yellow metal is consolidating within a tight range, reflecting mixed sentiment driven by expectations of Federal Reserve rate cuts and lingering market uncertainty.
Immediate resistance is positioned at $2,726.36, with higher levels at $2,738.21 and $2,752.21 presenting significant hurdles. On the downside, support lies at $2,698.01, followed by deeper levels at $2,676.58 and $2,659.46.
The 50-day EMA at $2,676.70 acts as a critical short-term support level, aligning with bullish momentum observed in recent sessions. However, the failure to break above the pivot point indicates cautious bearish sentiment.
A sustained move above $2,716.63 is essential for a shift toward a bullish trajectory, targeting resistance at $2,738. Conversely, a break below $2,698.01 could intensify selling pressure, pushing prices toward $2,676.58.
Traders should monitor the $2,716.63 pivot closely as it serves as a key decision point for market direction. While gold’s broader structure remains slightly bullish, overbought conditions near resistance zones may prompt short-term corrections.
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