gold prices saw a correction from a monthly peak of $2,670 early Thursday, influenced by a US holiday that led to cautious trading. The US Dollar has managed to maintain its recent gains, despite a decline in Treasury bond yields and prevailing risk aversion in the market. Analysts suggest that the gold market may experience further corrections, particularly given the emerging Bear Cross formation and a downturn in the Relative Strength Index (RSI).
The pullback in gold prices follows disappointing inflation data from China and the release of hawkish minutes from the Federal Reserve’s recent meeting. Market participants are now turning their attention to upcoming statements from several Fed officials as they navigate a thinly traded market due to the holiday. China’s Consumer Price Index (CPI) showed only a 0.1% annual increase in December, down from 0.2% in November. Likewise, the Producer Price Index (PPI) decreased by 2.3% year-on-year, which added to concerns about weakening domestic demand in the world’s largest gold -buying nation.
Factors contributing to gold ’s downward movement include the appreciation of the US Dollar and higher US Treasury bond yields, reinforced by positive domestic economic indicators such as job openings and manufacturing data. The December meeting minutes from the Fed indicated officials’ concerns about inflation and potential economic impacts from new trade policies. This context has fueled speculation around fewer anticipated interest rate cuts from the Fed this year, allowing sellers to re-emerge in the gold market following a brief period of gains.
Looking ahead, traders are set to focus on speeches from key Fed officials for hints regarding future monetary policies. Uncertainty surrounding potential tariff announcements from the incoming administration may further influence gold market dynamics. Technical analysis signals potential weakness for gold , with support levels identified at $2,644 and further down at $2,632. Any sustained declines could lead to testing the January 6 low at $2,615. Conversely, an upward movement beyond the $2,665 resistance could pave the way for a recovery toward $2,693 and $2,700 levels.
