Gold falls under $4,600 as US inflation eases, limiting US Dollar's advance

Gold Pulls Back After US Inflation Data

Gold (XAU/USD) experienced a slight decline on Tuesday, following the publication of December’s US inflation figures. The data showed that price levels remain steady, suggesting the Federal Reserve could consider further interest rate reductions in the future. At present, XAU/USD is trading at $4,590, down 0.15%, after reaching a new all-time high of $4,634 earlier in the session.

Gold Softens as US Inflation Cools, Geopolitical Uncertainty Limits Losses

Despite the Consumer Price Index (CPI) for December meeting expectations, the US Dollar remains firm, creating headwinds for gold prices. Both headline and core inflation figures were unchanged from the previous month, according to the Bureau of Labor Statistics.

Additional reports indicate improvements in the labor market, while St. Louis Fed President Alberto Musalem delivered remarks that were neutral to slightly hawkish.

Financial markets had anticipated a total of 50 basis points in rate cuts by year-end. However, recent news regarding a Department of Justice indictment involving Fed Chair Jerome Powell, which poses a challenge to the Fed’s independence, has reduced the likelihood of a rate cut at the January meeting.

Geopolitical Tensions and Upcoming US Data

Concerns over the Federal Reserve’s autonomy and escalating tensions in the Middle East are providing support for gold prices amid broader geopolitical risks.

US President Donald Trump has imposed a 25% tariff on countries conducting business with Iran, increasing pressure on China and Russia, two of Iran’s main trading partners.

The US economic calendar will soon feature the release of Producer Price Index (PPI) data for October and November, November’s Retail Sales figures, and a series of speeches from Federal Reserve officials.

Market Highlights: Gold Slips Alongside US Yields

• The US Dollar’s strength is a key factor behind gold’s recent pullback. The US Dollar Index (DXY), which measures the dollar against six major currencies, has risen 0.26% to 99.15. Meanwhile, US Treasury yields are declining, with the 10-year note dropping nearly two basis points to 4.167%.
• December’s US CPI was unchanged from November, matching expectations at 0.3% month-over-month. Year-over-year, inflation increased by 2.7%, consistent with the previous month.
• Core CPI rose by 0.2% month-over-month, falling short of the 0.3% forecast and mirroring the prior month’s result. Over the past year, core inflation held steady at 2.6%.
• The four-week average for ADP Employment Change improved from 11,000 to 11,750.
• New home sales in October slipped 0.1% month-over-month, dropping from 738,000 in September to 737,000. However, the Commerce Department reported that annual sales surged 18.7% year-over-year, as lower mortgage rates and falling prices may be supporting the housing market.

Technical Overview: Gold Faces Resistance Near $4,600

Gold’s upward momentum has stalled, with buyers unable to push prices above $4,650—a move that could have paved the way toward $4,700. The Relative Strength Index (RSI) is flattening near overbought levels, indicating waning bullish momentum and failing to reach a new high.

For gold to resume its uptrend, it must break through the $4,650 barrier. On the other hand, if XAU/USD falls below $4,550, sellers may gain confidence to drive prices down toward the intraday low of $4,500, with $4,400 as the next significant support level.