Gold declines on profit-taking, USD strength ahead of US CPI release

• Gold price loses ground in Thursday’s Asian session, pressured by profit-taking and stronger US Dollar.

• Fed rate cut bets and geopolitical risks could boost the safe-haven flows, capping the downside of Gold.

• Traders will closely monitor the US November CPI inflation report on Thursday.

Gold price (XAU/USD) edges lower below $4,350 during the Asian trading hours on Thursday. The precious metal retreats from seven-week highs amid some profit-taking and a rebound in the US Dollar (USD). The potential downside for the yellow metal might be limited after the recent US jobs data reinforce market expectations of further interest rate cuts by the US Federal Reserve (Fed) and drag the USD lower. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.

Furthermore, geopolitical tensions escalate after Venezuela deploys its navy to escort oil ships amid US blockade threats. This, in turn, could boost the Gold price as it is considered a traditional safe-haven asset. 

Traders brace for the release of the US Consumer Price Index (CPI) inflation data, which will be published later on Thursday. The headline CPI is expected to show a rise of 3.1% YoY in November, while the core CPI is projected to show an increase of 3.0% YoY during the same period. Also, the US weekly Initial Jobless Claims will be released later in the day. 

Daily Digest Market Movers: Gold declines on profit-taking ahead of US key inflation report

• Venezuela’s government has ordered its navy to escort ships carrying petroleum products from port, escalating the risk of a confrontation with the US after President Donald Trump ordered a “blockade” aimed at the country’s oil industry.

• Fed Governor Christopher Waller on Wednesday backed further interest-rate cuts to get the central bank’s setting back to neutral, per Bloomberg.However, Waller also warned there’s no need to rush amid elevated inflation. 

• Atlanta Fed president Raphael Bostic said on Tuesday that he did not support cutting rates last week and does not see a case for cutting rates next year unless inflation declines.

• The US Bureau of Labor Statistics (BLS) on Tuesday revealed that Nonfarm Payrolls (NFP) rose by 64,000 in November after falling by 105,000 in October. The Unemployment Rate in the US ticked higher to 4.6% in November from 4.4% in October.

• Futures on the federal funds rate are now pricing in a 31% probability the Fed will reduce rates next month immediately after the NFP report, compared with 22% just before, according to LSEG estimates.

Gold holds a positive long-term technical bias

Gold trades on a negative note on the day. According to the four-hour chart, the precious metal maintains a constructive outlook, with the price holding above the key 100-day Exponential Moving Average. The path of least resistance is to the upside as the Bollinger Bands widen and the 14-day Relative Strength Index (RSI) is located above the midline, suggesting that further upside looks favorable.  

If green candlesticks show up and momentum builds above the upper boundary of the Bollinger Band of $4,352, XAU/USD could be gearing up for another run at an all-time high of $4,381, en route to the $4,400 psychological mark. 

On the other hand, if the pair prints more red candles and stays below the December 17 low of $4,300, this could attract sellers toward the December 16 low of $4,271. The additional downside filter to watch is the 100-day EMA of $4,233.