The short-term outlook for gold remains bullish as traders eye the December 12 high of $2,726.30. A break above this level could trigger a rally towards the all-time high at $2,790.17. However, failure to hold the support at $2,693.40 could point to a correction towards $2,663.51 or lower, with the 50-day moving average at $2,644.00 providing additional technical support.
Retail sales and tariffs contribute to gold’s volatility
Thursday’s Retail Sales report is expected to be a crucial factor influencing the gold price. Strong consumer spending data could raise concerns about persistent inflation, limiting the Federal Reserve’s options for rate cuts. Conversely, softer data could boost hopes for accommodative Fed policy, potentially pushing gold prices higher.
In addition to inflation risk, analysts are also assessing the impact of potential tariffs under the incoming Trump administration. Any aggressive rate action could worsen inflationary pressures, complicating the Fed’s policy decisions and increasing gold’s appeal as an inflation hedge.
Fed policy and inflation expectations are driving bullion demand
Gold found support from weaker US core inflation data, reinforcing expectations of Federal Reserve rate cuts later this year. Traders are now pricing in the likelihood of two rate cuts by the end of the year, with the first possibly coming in June. Meanwhile, easing inflation and falling bond yields have put pressure on the dollar, creating additional tailwinds for gold.
Geopolitical stability limits the demand for safe havens
Although bullish factors dominate, gold’s rise is tempered by geopolitical developments, including a ceasefire agreement between Israel and Hamas. The easing of tensions in the Middle East has reduced demand for the safe-haven metal, which had previously driven prices higher.
Market forecast: cautiously optimistic
Gold’s technical strength and macroeconomic conditions indicate further upside potential. A move above $2,726.30 could mark an acceleration towards record highs, while robust retail sales or rate-driven inflation risks could also support prices. However, geopolitical stability and strong US consumer data could limit gains. Traders should be on the lookout for responses to key economic reports and policy changes to navigate this complex market environment.