- Gold price retreats from a one-month high as renewed USD dip-buying pressures the precious metal.
- The Israel-Hamas ceasefire agreement adds further weight to the safe-haven XAU/USD pair.
- Expectations for additional Federal Reserve rate cuts could limit USD strength and provide support for gold.
Gold price (XAU/USD) maintains a bearish tone during the first half of the European session on Friday, though it avoids significant selling and holds near the one-month high reached the previous day. The US Dollar (USD) regains traction, seemingly ending a three-day losing streak amid growing consensus that the Federal Reserve (Fed) will pause its rate-cutting cycle later this month. This, coupled with a generally upbeat mood in equity markets, weighs on the precious metal.
However, expectations of softer US inflation supporting further Fed rate cuts this year should cap USD gains and offer some support to non-yielding gold. Additionally, uncertainties surrounding President-elect Donald Trump’s trade policies and tariff plans are likely to limit losses for the safe-haven bullion. Despite these headwinds, XAU/USD remains on track to post its third consecutive daily gain as traders await US macroeconomic data for fresh direction.
Gold Price Slips Amid Modest USD Strength
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Recent US data indicating easing inflation fueled expectations of two Federal Reserve (Fed) rate cuts this year, supporting the non-yielding gold price.
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Fed Governor Christopher Waller echoed this sentiment on Thursday, suggesting inflation will likely continue to decline, with three or four rate cuts possible if US economic data weakens further.
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The outlook for Fed rate cuts drove US Treasury yields lower and kept the US Dollar near a one-week low, offering additional support to XAU/USD.
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Meanwhile, the US Commerce Department reported a 0.4% increase in December Retail Sales, with November’s figures revised upward to a 0.8% gain.
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The Philly Fed Manufacturing Index surged to 44.3 in January, its highest level since April 2021, far surpassing expectations and December’s revised 10.9 reading.
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However, US Jobless Claims rose to 217K during the week ending January 10, up from 203K previously, signaling potential labor market softening.
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Market expectations that the Fed will pause its rate cycle later this month persist, as concerns grow over US President-elect Donald Trump’s policies potentially driving inflation higher.
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On the geopolitical front, Israeli Prime Minister Benjamin Netanyahu announced a ceasefire agreement with Hamas, ending 15 months of conflict and securing the release of hostages in Gaza.
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Friday’s US economic calendar includes Building Permits, Housing Starts, and Industrial Production data, which could influence the USD and gold prices further.
Gold Price Poised for Further Gains, $2,720 Resistance in Focus
From a technical standpoint, positive oscillators on the daily chart suggest a bullish outlook, supporting the potential for further price increases. However, it would be prudent to wait for sustained strength and confirmation above the $2,715-$2,720 resistance zone before entering new long positions. Should this level be breached, gold could rise to the $2,745 resistance, followed by the $2,760-$2,762 area, and ultimately challenge its all-time high around $2,790, reached in October 2024.
On the downside, any corrective pullback is likely to find solid support around the $2,700-$2,690 zone. A further decline would likely present a buying opportunity, with support expected near $2,662-$2,660. A break below this level could signal a move toward the $2,635 zone, with further downside potential limited by the $2,650 confluence, which includes the 100-day Exponential Moving Average (EMA) and a short-term ascending trend line from November's swing low.
