Gold prices, represented by XAU/USD, have retreated slightly after reaching a new peak of $4,643, settling around $4,600 per troy ounce on Thursday. This decline follows a robust performance in the United States' economic indicators, including a stronger-than-expected Producer Price Index (PPI) and Retail Sales figures, alongside last week's decrease in the Unemployment Rate. These factors bolster the likelihood that the U.S. Federal Reserve will maintain its current interest rates.
The appeal of gold as a safe-haven asset has also diminished due to a reduction in geopolitical tensions. U.S. President Donald Trump noted the decline in violence related to Iran's internal crackdowns and suggested that large-scale executions were not forthcoming, while still leaving open the possibility of U.S. military intervention.
Concerns about the Federal Reserve's autonomy could potentially reignite interest in gold. Federal Reserve Chair Jerome Powell criticized the Trump administration's move to subpoena him, which he viewed as an attempt to pressure the Fed into adopting a more lenient monetary policy. Despite ongoing investigations, Trump stated he has no immediate plans to dismiss Powell.
The U.S. Dollar Index (DXY), which gauges the dollar's performance against a basket of six major currencies, has rebounded to 99.10, reducing the attractiveness of dollar-priced gold for foreign investors. This follows a report from the U.S. Census Bureau indicating a 0.6% increase in November's Retail Sales to $735.9 billion, surpassing expectations.
The Producer Price Index also showed significant growth in November, with both headline and core figures reaching a 3% year-over-year increase. In response to the recent labor market data, Morgan Stanley has postponed its predictions for interest rate cuts to June and September.
Minneapolis Fed President Neel Kashkari highlighted the resilience of the U.S. economy and noted that tariff impacts were less severe than anticipated. While inflation remains above desired levels, it is trending in a favorable direction.
The Fed's Beige Book reported modest economic growth across most U.S. regions since mid-November, marking an improvement from previous reports. Meanwhile, core inflation metrics indicated a more stable price environment, with the Core Consumer Price Index rising 0.2% in December.
In international news, the U.S.-based HRANA rights group reported a death toll of 2,571 from Iran's protests. President Trump has voiced support for continued demonstrations in Iran and warned of potential tariffs on nations conducting business with Tehran.
In the labor market, U.S. Nonfarm Payrolls increased by 50,000 in December, below expectations, yet the Unemployment Rate fell to 4.4%, and Average Hourly Earnings rose to 3.8% year-over-year.
Technically, gold maintains its bullish outlook, trading around $4,600 and remaining above the nine-day Exponential Moving Average (EMA), which supports a short-term uptrend. The 50-day EMA also signals a broader upward bias, while the 14-day Relative Strength Index (RSI) at 66.05 indicates continued positive momentum without overbought conditions.
Immediate resistance stands at the recent high of $4,643, with further resistance at the upper boundary of the ascending wedge near $4,660. A breakout above this area could drive prices towards $4,700. Support is found at the nine-day EMA of $4,535.64, followed by the lower wedge boundary around $4,490.
Gold remains a key asset for investors due to its historical role as a store of value and its ability to hedge against inflation and currency depreciation. Central banks, especially from emerging economies like China, India, and Turkey, continue to increase their gold reserves, highlighting its importance in economic stability. The metal's price is influenced by geopolitical events, interest rates, and the strength of the U.S. dollar.