Gold prices experienced a decline of over 0.7% on Tuesday, reaching $2,039 per ounce, as a stronger US Dollar and rising yields contributed to the bearish sentiment. The dip in gold prices followed failed attempts to surpass the weekly high above $2,060, with spot gold falling 0.74% and gold futures slipping 0.44% to $2,042.
The decline in gold comes after an initial increase due to escalating tensions in the Middle East, prompting investors to seek safe-haven assets. However, renewed uncertainty surrounding the Federal Reserve’s monetary policy path, driven by the latest inflation data, has cooled investor sentiment towards gold.
The December consumer price index (CPI) report revealed a 0.3% increase in the annual inflation rate, raising concerns that the Fed may delay the anticipated first policy rate cut, initially expected in March. Despite market expectations, the Fed is cautious about adopting a dovish stance, given that the US CPI is nearly double the central bank’s target of 2%, and labor demand remains robust.
Despite the Tuesday decline, the technical outlook for gold remains optimistic, supported by the 50-day simple moving average at $2,020 per ounce and a previous swing high at $2,009 per ounce. These levels are expected to act as short-term support, preventing further sell-offs. If gold gains momentum, it could face resistance at $2,043 per ounce, followed by $2,070 per ounce.
