XAU/USD Retreats Below $4,350 as Dollar Surges Ahead of Key CPI Print

Yellow metal faces selling pressure on Thursday as the US Dollar rebounds, though safe-haven demand may provide a floor ahead of crucial inflation data.

Gold slipped below the $4,350 mark during early Asian trading on Thursday, retreating from its seven-week peak as traders locked in gains amid a strengthening US Dollar. The pullback reflects typical profit-taking after the precious metal’s recent rally, but the downside appears limited given shifting Fed policy expectations.

What’s Weighing on Gold?

The immediate headwind comes from USD appreciation, which typically moves inversely to gold prices. A firmer greenback raises the cost for international buyers. However, the recent softer employment report has reignited market bets on additional Fed rate cuts, which could cap losses for the non-yielding asset. Lower rates reduce the opportunity cost of holding gold, a fundamental driver of demand.

Geopolitical tensions add another layer to the narrative. Venezuela’s navy mobilization to protect oil shipments amid US blockade threats underscores broader global instability, traditionally favoring safe-haven assets like gold.

Market Focus: CPI and Fed Signals

All eyes turn to Thursday’s US Consumer Price Index release. The headline figure is expected to show a 3.1% year-over-year increase for November, with core CPI projected at 3.0% YoY. These figures will significantly influence near-term rate-cut probabilities.

Recent Fed commentary remains divided: Governor Christopher Waller supports further easing but cautioned against rushing given sticky inflation, while Atlanta Fed President Raphael Bostic signaled skepticism about cuts without clear disinflation progress.

November’s weaker-than-expected nonfarm payrolls report (64,000 vs prior 105,000 decline) has shifted rate-cut odds to 31% for next month, up from 22% previously.

Technical Outlook Remains Constructive

Despite Thursday’s weakness, the four-hour chart suggests upside bias persists. Gold trades above the pivotal 100-day exponential moving average, with Bollinger Bands expanding and the 14-day RSI holding above midline—textbook signals of bullish momentum.

A break above $4,352 targets an all-time high near $4,381 and the psychological $4,400 level. Conversely, sustained weakness below December 17’s low of $4,300 could invite sellers toward $4,271 and the 100-day EMA support at $4,233.

The interplay between inflation data, Fed policy direction, and geopolitical risks will likely dictate gold’s next significant move.