Gold (XAU) prices experienced a one-month low on Wednesday, impacted by robust economic data that bolstered the US dollar and Treasury yields, subsequently reducing expectations of a Federal Reserve (Fed) rate cut in March.
The December US retail sales numbers surpassed expectations, reflecting the economy’s resilience as it entered the new year. The release of the Retail Sales report contributed to the US dollar remaining near its one-month high, accompanied by an increase in yields for benchmark US 10-year Treasury notes.
Market skepticism regarding the timing and likelihood of a Fed rate cut is cited as a factor exerting downward pressure on gold prices. Bob Haberkorn, Senior Market Strategist at RJO Futures, highlighted the challenge for gold to rally in the face of a strong dollar and the time required for rate cuts: “With the dollar being strong and cuts taking time, it is hard for gold to hold a rally.”
While acknowledging the downward pressure, Haberkorn also emphasized that geopolitical tensions could continue supporting XAU/USD, suggesting that the pair might stabilize around $2,000. In early Asian trading hours, XAU/USD saw a slight rise.
Daniel Ghali, Senior Commodity Strategist at TD Securities, pointed out that robust purchasing activity in China is providing support to the gold market. Traders are advised to focus on the upcoming release of the US Initial Jobless Claims report, which could impact gold prices. A figure lower than expected may push gold below $2,000, while a higher-than-expected number could reverse the local bearish trend in XAU/USD.
Wang Tao suggested, “Spot gold may test resistance at $2,016 per ounce, a break above which could lead to a gain to $2,045.” The gold market remains dynamic, influenced by economic indicators, geopolitical developments, and investor sentiment.
