Gold prices fell to a new weekly low of $2,633 on Tuesday, following the release of strong U.S. retail sales data. The unexpected strength in retail spending dampened market expectations regarding the Federal Reserve’s approach to easing interest rates, which is now anticipated to occur gradually in 2025. As of the latest update, XAU/USD is trading at $2,637, a decrease of 0.57%.
The Federal Reserve’s two-day meeting is currently underway in Washington, D.C., with a widely anticipated 25-basis point interest rate cut expected on Wednesday. While markets have priced in this move, investors are closely watching for the Fed‘s Summary of Economic Projections (SEP) and the Dot Plot, which will offer insight into the central bank’s rate path for 2025.
In economic news, U.S. retail sales for November surged by 0.7% month-over-month, surpassing expectations and marking a significant improvement from October’s 0.5% gain. However, the Federal Reserve also reported a drop in industrial production, which fell 0.1% month-over-month, signaling ongoing challenges for business activity amid the effects of higher interest rates.
Despite a retreat in U.S. Treasury yields and real yields, gold prices remain under pressure. The strength of the U.S. dollar continues to limit significant gains for the non-yielding metal.
Historically, lower interest rates have been supportive for gold prices. Speculation surrounding potential fiscal policies under a future Trump administration, which could increase inflationary pressures, is also adding a layer of uncertainty, potentially influencing the Federal Open Market Committee’s (FOMC) decision-making in the months ahead.
Looking ahead, the U.S. economic calendar includes the FOMC’s policy decision on Wednesday, along with the release of the core Personal Consumption Expenditures (PCE) Price Index, which will be closely scrutinized for signals about future monetary policy.
Market Summary: Gold Prices Slip Below $2,650
Gold prices extended their losses as U.S. real yields remained under pressure, falling two basis points to 2.059%, a factor that typically supports the precious metal. The yield on the 10-year U.S. Treasury bond also dropped, falling by 2.5 basis points to 4.379%.
The U.S. Dollar Index rose 0.07%, reaching 107.01, adding further downward pressure on gold.
Retail sales data for November showed a stronger-than-expected increase, rising by 0.7% month-over-month, well above the 0.5% gain in October. On a yearly basis, retail sales grew from 2.9% to 3.8%. Meanwhile, industrial production showed signs of weakness, increasing by just 0.1% in November, a slight improvement over the prior month’s decline but still below expectations.
S&P Global’s services sector report indicated that U.S. business activity remains strong in that segment, offering some optimism for economic growth.
According to the CME FedWatch Tool, markets have fully priced in a 99% probability of a quarter-point rate cut by the Fed on Wednesday. Looking ahead to 2025, investors are betting that the Fed will lower rates by a total of 100 basis points.
Technical Outlook: Gold Retreats, Eyeing 100-Day SMA
The near-term outlook for gold remains slightly bearish, despite the overall uptrend being intact. The price has consolidated within the $2,602-$2,670 range, with resistance at the 50-day and 100-day Simple Moving Averages (SMAs).
A drop below the 100-day SMA could see gold test support at $2,600, with further downside potential toward the November 14 swing low of $2,536. The August 20 peak at $2,531 may also come into play if the bearish trend persists. On the upside, a rally past $2,650 could push gold towards the next resistance level at the 50-day SMA, around $2,670, followed by the $2,700 mark.
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