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Gold (XAU/USD) climbs over 0.14% on Tuesday after US economic data augmented speculation of a rate cut by the Federal Reserve (Fed) at the December 9-10 meeting. Also, falling US Treasury yields and a weaker US Dollar keep XAU/USD trading at $4,141 after hitting a daily low of $4,109.

XAU/USD advances on falling yields, weak Dollar

US inflation and Retail Sales have shown that rising prices seem to have stalled, while households reduced their consumption in September, two months ahead of the Christmas season. In addition to this, the Conference Board (CB) Consumer Confidence dipped in November as Americans remain uncertain about jobs, incomes and their financial situation, due to the government shutdown.

Given the backdrop, money markets price in an 82% chance of a 25-basis-point (bps) rate cut at the next meeting, up from last week’s 50% odds.

On Monday, the Minneapolis Fed President Neel Kashkari said that “there are real use cases for AI, but not for crypto, adds people are feeling hardship due to inflation,” reaffirming his hawkish stance, amid a divided Federal Open Market Committee (FOMC).

Ahead this week, the US economic docket will feature Durable Goods Orders and Initial Jobless Claims on Wednesday, which could set the stage ahead of Fed officials entering their blackout period.

Daily market movers: Lower US inflation reading, to cement Fed cut in December

• The Producer Price Index (PPI) rose 2.7% YoY in September, matching both forecasts and August’s reading, signaling that price pressures have steadied. Core PPI eased to 2.6% from 2.9%, coming in below expectations of 2.7%.
• Retail Sales increased 0.2% MoM in September, down from August’s 0.6% gain, pointing to softer consumer spending. Meanwhile, the Conference Board reported that household sentiment deteriorated in November, with Consumer Confidence dropping 6.8 points to 88.7 from 95.5 in October.
• The US Dollar Index (DXY), which tracks the buck’s performance versus six currencies, plummets 0.50% below the 100.00 mark at 99.69. At the same time, US Treasury yields fall, with the 10-year US Treasury note yield falling three basis points to 4.00%. US real yields, which correlate inversely to Gold prices, are also falling three basis points to 1.80%.

Technical analysis: Gold price rallies towards $4,200

Gold remains upwardly biased, even though it has consolidated below the $4,200 mark with traders waiting for a fresh catalyst. The Relative Strength Index (RSI), although flat, is above the 50-level threshold, an indication that buyers are in charge.

The first key resistance is $4,200, followed by the November 13 peak at $4,245. A breach of the latter will expose $4,300 and the record high of $4,381. Conversely, a drop below $4,100 clears the path to challenge the 20-day Simple Moving Average (SMA) at $4,045, before diving to $4,000.

(Click on image to enlarge)

Gold daily chart

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