Is Gold Setting Up for a Rebound? CPI Data and USD Weakness Hold the Keys

Gold traded under pressure during Thursday’s Asian session, slipping below the $4,350 mark as traders locked in profits and the US Dollar rebounded. However, the downside appears capped by growing expectations of Fed rate cuts and escalating geopolitical tensions supporting safe-haven demand.

Market Headwinds: Profit-Taking Meets Dollar Strength

The precious metal retreated from seven-week peaks as investors took profits off the table. The stronger US Dollar acted as an additional headwind, given the inverse relationship between the two assets. Yet market dynamics suggest this pullback may be temporary. Recent employment data showed only 64,000 nonfarm payrolls in November—a significant miss that has reinvigorated rate-cut speculation at the Federal Reserve.

Fed Signals Point Toward Easier Monetary Policy

Fed officials remain divided on the path forward. Governor Christopher Waller advocated for continued interest-rate reductions to normalize policy, though he cautioned against rushing given persistent inflation concerns. Meanwhile, Atlanta Fed President Raphael Bostic took a more hawkish stance, opposing the recent cuts and seeing little room for further easing next year unless inflation falls sharply.

These conflicting signals have moved markets. Futures pricing now reflects a 31% probability of a Fed rate cut in the coming month, up from 22% before the jobs report. Lower rates would diminish the opportunity cost of holding non-yielding Gold, potentially fueling fresh upside.

Geopolitical Risk Adds to Safe-Haven Appeal

Venezuela’s decision to deploy naval escorts for oil shipments amid US blockade threats has elevated geopolitical risk. Such tensions historically drive capital toward safe-haven assets like Gold, which could provide additional support to prices if volatility spikes.

CPI Report and Technical Setup Could Dictate Next Moves

All eyes turn to Thursday’s US Consumer Price Index release. Headline CPI is forecast to rise 3.1% year-over-year, with core CPI expected at 3.0%. A softer-than-expected print could accelerate Fed rate-cut bets and weigh further on the Dollar, benefiting Gold.

Technically, Gold maintains a constructive setup despite the day’s weakness. The price sits above the 100-day Exponential Moving Average, and the 14-day RSI trades above midline, signaling upside bias. If buyers step in and push above the $4,352 Bollinger Band upper bound, the next target becomes the all-time high near $4,381, with the $4,400 psychological level in sight.

Conversely, if selling pressure intensifies and the price breaks below December 17’s low of $4,300, support levels at December 16’s $4,271 and the 100-day EMA at $4,233 come into play.

The key takeaway: Gold’s near-term direction hinges on CPI data and Fed expectations. While profit-taking has caused a pullback, the confluence of dovish Fed signals, geopolitical risks, and technical support suggests the precious metal remains well-positioned for renewed strength.