Gold retreats as fresh US data boosts US dollar

Strong US Retail Sales figures and a spike in US Treasury yields have continued to drive down gold prices, which have lost more than 1.11% of their value. Gold’s decrease is partly due to the US Dollar Index’s upward trajectory, which reached a five-week high, and hawkish remarks made by the Fed. The precious metal is trading at $2005.87 per ounce at the time of writing.

As traders reassess their expectations for the Fed to decrease interest rates, their attention shifts to impending US unemployment and consumer mood data. The price of gold is under pressure, down more than 1% during the course of two trading sessions on Wednesday, as speculators are rushing to reduce their bets on the Federal Reserve’s rate cut as a result of positive economic data from the US sending US yields higher.

Gold’s decline was mostly caused by Wednesday’s strong US Retail Sales report, which came as US Treasury bond rates were moving higher. According to data from the US Department of Commerce, sales in December increased by 0.6% and above estimates by 0.4%. The US Dollar Index (DXY) showed that the data helped push the Greenback to a five-week high of 103.69, while US Treasury bond yields kept rising.

After the Fed Governor Christopher Waller stated on Tuesday that there is “no reason to move as quickly or cut [interest rates] as rapidly as in the past,” implying a more cautious approach to monetary policy adjustments, expectations for a rate cut by the Federal Reserve (Fed) fell from 63% a day earlier to 52%. Despite this prudence, he is prepared to back rate reductions in the event that inflation clearly declines.

Lately, Industrial Production (IP) in the US has expanded by 0.1%, exceeding the forecast and the previous month’s 0% increase, helped by a pickup in motor-vehicle production linked to the United Auto Workers (UAW) strike.

Sources cited by Reuters said, “Markets were betting that the Fed was starting to cut rates already at the end of the first quarter of this year, and now they’re recalibrating a bit after hawkish comments from some members of the Federal Reserve.”

Ahead of the week, the US calendar will feature further Fed speakers, along with unemployment claims data on Thursday and the release of the University of Michigan’s (UoM) Consumer Sentiment poll.

With the Gold Index, XAU/USD falling below the 50-day moving average (DMA), the decline towards the year-to-date low of $2001 has intensified. With a clear breach of the $2000 barrier exposing the 100 and 200-DMAs at roughly $1971/$1963, respectively, gold is continuing to lose ground.