Gold prices surged past the $2,700 mark on Thursday, continuing their upward momentum as the US Dollar trimmed some of its earlier gains. At the time of writing, XAU/USD was trading at $2,715, up by 0.72%. This rally follows the release of US economic data, which showed consumer spending and jobs figures remain solid, while US bond yields fell amid expectations of further rate cuts by the Federal Reserve (Fed).
The precious metal extended its gains as market participants positioned themselves ahead of US President-elect Donald Trump’s inauguration. The US Census Bureau reported that Retail Sales in December fell short of expectations, although November’s figures were revised upward, signaling ongoing consumer strength.
Additionally, the number of Americans filing for unemployment benefits increased for the first time since December 2024, putting further pressure on the US Dollar.
US Economic Data Weighs on USD, Bolstering Gold
The US Dollar Index (DXY), which tracks the USD’s performance against six major currencies, fell by 0.14%, dipping below the 109.00 mark. This decline was largely due to dovish comments from Fed Governor Christopher Waller, who suggested that the US central bank could lower borrowing costs more quickly if the disinflation process progresses as expected.
With the US economic docket quiet for the remainder of the day, traders are focusing on upcoming housing data, including Building Permits and Housing Starts.
Gold Price Driven by Falling US Yields and Dovish Fed Remarks
Gold’s rise was fueled by a drop in real yields, with the 10-year Treasury Inflation-Protected Securities (TIPS) yield falling five and a half basis points to 2.18%. The US 10-year Treasury bond yield also slipped by five basis points to 4.604%, providing a tailwind for the precious metal. Despite a 0.4% increase in December US Retail Sales, which missed the market’s 0.6% estimate, November’s upward revision to 0.8% indicated underlying economic resilience.
Labor market data showed an uptick in Initial Jobless Claims to 217,000, exceeding expectations of 210,000, which added to the pressure on the US Dollar.
Traders are now pricing in a near-even chance that the Fed will cut rates twice by the end of 2025, with the first reduction potentially occurring in June. Fed officials, including Waller, have hinted that a rate cut could come sooner if inflation moves closer to the Fed’s 2% target.
Technical Outlook: Gold Targets $2,750 Resistance
Gold’s uptrend continues, with prices breaking key resistance at $2,700. The Relative Strength Index (RSI) remains bullish, signaling that buyers could drive the price higher. The immediate resistance is at $2,726, the December 12 high, followed by the key level of $2,750. If these levels are surpassed, gold could approach its all-time high (ATH) of $2,790.
On the downside, a drop below $2,700 could lead to a test of the January 13 low at $2,656, followed by support near the 50 and 100-day Simple Moving Averages (SMAs) around $2,639-$2,642.
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