Gold (XAU/USD) remains on the defensive below the $4,600 mark through the first half of the European session on Tuesday, though it remains close to the all-time peak, touched the previous day, amid a supportive fundamental backdrop. The US Dollar (USD) gains some positive traction following the previous day’s decline and turns out to be a key factor acting as a headwind for the commodity. That said, concerns about the US Federal Reserve’s (Fed) independence might keep a lid on any meaningful USD appreciation. This, along with bets for more Fed rate cuts, might continue to benefit the non-yielding yellow metal.
Apart from this, persistent geopolitical uncertainties should help limit the downside for the safe-haven Gold. Traders might also refrain from placing aggressive directional bets and opt to wait for the release of the latest US consumer inflation figures later today. The crucial data will play a key role in influencing market expectations about the Fed’s future rate-cut path, which will drive the USD demand and provide a fresh impetus to the XAU/USD pair. Nevertheless, the aforementioned supportive factors suggest that any corrective slide could be seen as a buying opportunity and is more likely to remain cushioned.
Daily Digest Market Movers: Gold bulls remain on the sidelines amid firmer USD as US CPI report looms
- A Trump administration criminal probe into Federal Reserve Chair Jerome Powell fueled uncertainty about the US central bank’s independence and pushed the safe-haven Gold to a fresh all-time high at the start of this week.
- Fed Chair, in a rare statement, said that the threat of criminal charges against him is a consequence of US President Donald Trump’s anger over the central bank’s refusal to cut interest rates despite repeated public pressure.
- Geopolitical tensions also remained elevated after Trump told reporters that he was considering a range of options, including potential military action, in response to Iran’s crackdown on mass anti-government demonstrators.
- Adding to this, Trump announced late Monday that any country doing business with Iran will face a new tariff of 25% on its exports to the US. This turns out to be another factor acting as a tailwind for the XAU/USD pair.
- The closely-watched US Nonfarm Payrolls report released last Friday backed the case for potentially stagnant policy in the first quarter. Traders, however, are still pricing in two more interest rate cuts by the Fed later this year.
- The outlook, in turn, fails to assist the US Dollar in attracting any meaningful buyers and further lends support to the commodity. The XAU/USD bulls, however, opt to wait for the release of the latest US consumer inflation figures.
- The headline US Consumer Price Index (CPI) is expected to have risen by 0.3% in December, and the yearly rate is seen holding steady at 2.7%. Excluding Food and Energy, the core CPI is estimated to edge higher to 2.7% YoY.
- Any significant divergence in comparison to the broader consensus would lead to a shift in the likelihood of a Fed rate cut at the January 28 meeting, which, in turn, would infuse volatility around the USD and the precious metal.
Gold technical setup backs the case for the emergence of dip-buying at lower levels
The ascending channel from $3,920.24 guides the uptrend, with resistance near $4,656.02. The 50-day Simple Moving Average (SMA) trends higher, underscoring firm buying bias. The XAU/USD pair holds above the SMA, preserving bullish control. The Moving Average Convergence Divergence (MACD) line stands above the Signal line, and both lie in positive territory. The widening positive histogram suggests strengthening momentum, while the Relative Strength Index (RSI) prints at 70.26 (overbought), which could cap gains into the channel ceiling.
Trend conditions remain favorable while the 50-day Simple Moving Average (SMA) rises and price respects it, with the SMA at $4,255.80 acting as nearby support. The MACD above zero reinforces the bullish tone, though momentum could cool as the RSI holds in overbought territory. A pullback would be expected to remain contained above the SMA, whereas a close above the channel cap would open the path for continuation.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Consumer Price Index ex Food & Energy (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is seen as bearish.
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
