Gold price retreats on mixed US data, rate cut speculation

• Gold declines over 1% as US PPI rises unexpectedly, countering a weak jobs report and complicating disinflation narrative.
• Investors anticipate a potential Fed rate cut with high expectations of a 25 bps reduction next week.
• US Treasury yields see a slight increase, adding pressure to Gold prices as market prepares for upcoming Fed decision.

Gold prices snapped a four-day streak of gains on Thursday, tumbling more than 1% as investors digested mixed economic data from the United States. A softer than expected jobs report, but higher prices on the producer’s side, kept traders from pushing Bullion prices higher. The XAU/USD trades at $2,684.

The Producer Price Index (PPI) exceeded forecasts, hinting that the disinflation process might be stalling. Along with that, the US Bureau of Labor Statistics revealed the labor market is cooling as the number of Americans filing for unemployment benefits was above estimates.

Bullion prices dropped on speculation that traders booked profits ahead of the Federal Reserve’s (Fed) monetary policy decision next week.

There’s growing certainty that the Fed will lower borrowing costs by 25 basis points at the December 17-18 meeting. The swaps market shows odds of 98% that the fed funds rate will be cut to the 4.25%-4.50% range.

Source: Prime Market Terminal

A timid jump in the US 10-year Treasury bond yield of one-and-a-half basis points to 4.289% weighed on the golden metal.

Earlier the European Central Bank (ECB) lowered interest rates for a third straight meeting, hinted that further easing is coming as inflation edges down toward the 2% goal.

Ahead this week, the US economic docket remains absent with traders bracing for next week’s Fed meeting.

Daily digest market movers: Gold price is heavy as US real yields climb

• Gold prices advanced as US real yields rose two basis points to 1.996%.
• The US Dollar Index remains firm at 106.75, up 13%.
• The PPI for November showed that headline inflation on the producer side rose by 3% YoY, up from 2.4% in October and above forecasts of 2.6%, while core PPI increased by 3.4% YoY, exceeding projections of 3.2% and rising from 3.1%.
• US Initial Jobless Claims for the week ending December 7 jumped to a two-month high of 242K, exceeding estimates of 220K.
• This data added to Wednesday’s CPI figures, cementing the case for another rate cut by the Fed. However, for 2025, the US yield curve suggests that speculators estimate 100 basis points of easing toward the end of the year.
• Data from the Chicago Board of Trade, via the December Fed funds rate futures contract, shows investors estimate 24 bps of Fed easing by the end of 2024.
• Analysts at Goldman Sachs noted that China’s central bank “may even increase Gold demand during periods of local currency weakness to boost confidence in their currency.”

Technical outlook: Gold price resumes its bullish trend, eyes $2,721

Gold price rally pauses as the non-yielding metal retraces to the 50-day Simple Moving Average (SMA) at around $2,670. Despite this, momentum remains bullish as portrayed by the Relative Strength Index (RSI). Over the short term though, sellers are in charge.

If XAU/USD slides beneath the 50-day SMA, look for a drop toward $2,650, ahead of the $2,600 mark. On the other hand, if buyers conquer the $2,700 resistance level, the next supply zone tested would be the November 25 peak of $2,721, before challenging the record high of $2,790.