The price of gold (XAU/USD) slipped below the $2,000 mark in early Asian trading on Thursday, driven by robust economic data in the United States that has tempered expectations of an imminent interest rate cut. As of the latest update, the gold price is trading at $2,007, reflecting a marginal 0.07% increase for the day.
Simultaneously, the US Dollar Index (DXY), a key measure of the USD’s strength against major trading partners, surged to a new 2024 peak near 103.70. This upward movement in the US Dollar was accompanied by a rise in US Treasury yields, with the 10-year yield standing at 4.10%.
The uncertainty surrounding when the Federal Reserve (Fed) might initiate discussions on interest rate cuts has left investors cautious. According to the CME Fedwatch tool, traders currently see a 57% probability of a 25 basis points (bps) interest rate cut in March, down from 70% at the beginning of the week.
The gold market was further influenced by better-than-expected US Retail Sales data, released on Wednesday. December Retail Sales exceeded forecasts, registering a 0.6% month-on-month increase compared to the previous month’s 0.3%. The control group’s Retail Sales figure for December arrived at 0.8%, up from the prior reading of 0.5%.
Additionally, concerns about a potential downturn in Chinese economic data have weighed on gold prices, given China’s status as one of the world’s leading gold consumers. China’s Gross Domestic Product (GDP) expanded at 5.2% for the previous year, falling short of the expected 5.3%. Industrial production in December rose by 6.8% year-on-year, while Retail Sales moderated to 7.4% year-on-year from 10.1% in the preceding month.
Traders are closely monitoring upcoming US economic indicators, including Housing Starts, Building Permits, weekly Initial Claims, and the Philly Fed Manufacturing Index, scheduled for release on Thursday. These figures are anticipated to provide further clarity and direction for the gold market.
