Amidst a bid in US yields and the dollar, alongside hawkish commentary from Federal Reserve Governor Christopher Waller, who emphasised support for a more methodical and careful approach to loosening policy, we have seen the price of spot gold (XAU/USD) trade on the back foot in recent days and consequently pull the yellow metal into an interesting area of technical support.

US Retail Sales Jumped in December

Today welcomed the latest retail sales numbers from the US, which rose more than expected in the month of December 2023, up 0.6% MoM (surpassing market estimates of 0.4% and beating November’s 0.3% reading). Retail sales ex-autos were also up 0.4% (estimates and prior: 0.2%), while ex-gas/autos came in unchanged at 0.6% and the retail control group—contributes to GDP—was up 0.8% in December from 0.4% in November (0.5% revised) and considerably north of market estimates at 0.2%.

The latest retail sales numbers, together with recent job growth and headline inflation increasing to 3.4% on a year-on-year basis in December from 3.1% in November, signals that the Fed may not consider cutting rates until the latter end of Q2, despite markets pricing in six 25bp rate cuts. Unsurprisingly, recent data has underpinned the buck and US bond yields, as well as weighed on the price of gold.

Gold (XAU/USD) Technical Setting

Technically, the yellow metal is noticeably lower today, down -1.0% as of writing, extending Tuesday’s downside push (-1.3%).

Unquestionably, longer-term price action remains biased to the upside, according to the weekly timeframe. Following the all-time high printed at $2,148 in early December, we have seen the precious metal fade the underside of resistance at $2,075 and is poised to continue pressing southbound until the next obvious weekly support base at $1,968.

Meanwhile, over on the daily timeframe, following the rejection of the weekly resistance mentioned above at $2,075, price action is fast approaching the key psychological level of $2,000. Sharing space with this level is an AB=CD bullish formation at $1,990, denoted through a 100% projection ratio. Therefore, while bears are clearly in the driving seat for the time being, the current uptrend, in addition to daily support between $1,990 and $2,000, could be an area that pulls in dip-buying interest if challenged.

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