Gold fluctuates around $1906 after snapping two-day losses

Gold price snaps two days of straight losses, gaining traction on Wednesday, as the US dollar slides to eight-month lows around 101.528 but lately has recovered some ground and exchanged hands around 101.871. Another reason that keeps the XAU/USD underpinned is falling US Treasury bond yields, with the 10-year note rate plunging below 3.40%, at 3.390%, as it slides 16 bps.

Wednesday’s US Data showed an improvement in inflation, while retail sales slowed a little bit, to set the scene for Fed to slow down its tightening circle. At the time of writing, the Gold Index is trading at $1905.51 after sliding from Wednesday’s $1925.88 high.

Wall Street opened in the green territory and benefited from the US data. The US Commerce Department reported that December Retail Sales retreated -1.1% MoM, below estimates of a -0.8% contraction, for two consecutive months. November figures were downward revised to -1.0% from -0.6%. Retail Sales on an annual basis rose 6%, unchanged from November’s data.

In terms of Inflation, the US Producer Price Index (PPI) for December slides from -0.1% to -0.5% MoM data that could encourage the Fed to raise rates significantly higher. Excluding volatile items (food and energy) the core PPI rose by 0.1% MoM, unchanged when compared to consensus and lower than November’s 0.2%. Annually based figures showed an increase of 6.2% in PPI, below estimates of 6.8%, while core PPI rose by 5.5%, beneath the 5.7% expected.

The Fed reported that Industrial Production in the US decreased -0.7% in December and -1.7% in Q4. Additionally, US manufacturing output fell -1.3% last month, albeit November’s data was downward revised -1.3%.

St. Louis Fed President James Bullard said the Fed should get rates above 5% “as quickly as we can” before pausing rate hikes as the US central bank tries to curb sticky inflation. Bullard added that inflation “will probably recede in 2023 but not as fast as financial markets expect.”

Technically, gold is being influenced by a mild USD’s recovery and the Relative Strength Index (RSI) entering overbought conditions.