The XAUUSD (Gold) faced a substantial selling pressure, failing to surmount the weekly peak of 2,060.00. Investors responded to the uncertainties surrounding the potential rate cut by the Federal Reserve, which was prompted by the recent Consumer Price Index (CPI) report for December.
A Rate Cut or Not?
Although market sentiments lean towards a March interest rate cut, policymakers are hesitant to adopt a dovish stance on the subject. Despite maintaining interest rates between 5.25% to 5.50%, the U.S. economy demonstrates labor demand stability, virtually double the required 2% consumer price inflation, and a low risk of recession. This enables Federal Reserve policymakers to temporarily sustain a monetary policy stance that is comparatively restrictive.
In anticipation, monthly U.S. retail sales, industrial production, and the Fed's Beige Book data will contribute new perspectives to the interest rate outlook moving forward.
Retail Sales In Focus
The December employment and inflation figures exceeded initial projections, increasing the possibility of a 150 basis point rate cut by the end of 2024.
December probably observed substantial increase in retail sales, propelled by consumer confidence that was elevated by soaring stock markets. Reportedly, annualized auto volumes increased by 3% to 15.8 million units, while weekly credit card expenditure remained stable.
In contrast, it is anticipated that industrial production will expand by a moderate 0.1%, while manufacturing is projected to remain virtually unchanged, mirroring the downward trajectory observed in the ISM manufacturing report since October 2022. Although the auto industry may be beginning to recover from previous downturns, the majority of other sub sectors face difficulties due to lackluster order books.
Overall better than expected Retail sales could work as an additional sign of a rate cut, lowering the XAUUSD price in the intraday chart.
Gold (XAUUSD) Technical Analysis
XAUUSD faced a significant decline this week, failing to reclaim its weekly peak of $2,062. Moreover, the precious metal is anticipated to maintain an uncertain status pending further indications concerning the Federal Reserve's position on interest rate cut. Gold price has fallen below the 20-day Exponential Moving Average (EMA), after retracing all gains since Monday. However, the 100-day Support level is still below the price with an upward slope, which could be a major support level to look at.
If Gold is unable to regain its footing above the 20 DMA level, we may expect further decline towards the 1973.00 support level. The long opportunity might come after an immediate bullish reversal with a daily candle above the 2054.00 level.