The US dollar rose to a one-year high of 107.064, dealing a heavy blow to gold prices. Buoyed by stronger-than-expected economic data, including a 0.4% increase in retail sales in October and revised September figures, the dollar’s strength reduced gold’s appeal among international buyers. As the dollar maintained dominance, gold lost its position as a hedge against economic uncertainty.
Does economic data shape the Fed’s policy expectations?
Inflation data shows the core CPI at 3.3%, well above the Federal Reserve’s 2% target. This led to a shift in interest rate cut expectations, with the probability of a cut falling to 59% in December, down from 83% earlier this week. Gold, which benefits from a low interest rate environment, faced additional selling pressure as traders adjusted to the potential for long-term interest rate stability.
Can technical support levels prevent further losses?
Technically, gold’s weekly close just above $2,533.76 maintains this critical support level. Failure to hold above could lead to an accelerated decline towards the 50% retracement level at $2,387.23. The resistance levels are at $2,571.68 and $2,631.04, with last week’s high at $2,686.17 and a low at $2,536.85.
What is the market outlook for gold?
The short-term outlook remains bearish. The continued strength of the dollar and high interest rates are likely to keep prices under pressure. A break below $2,533.76 could open the door to further losses. However, stabilization at current levels could trigger a technical recovery above $2,571.68. Traders will keep a close eye on the Fed’s upcoming commentary and economic data for clearer direction.