Gold price benefits from the US Dollar retreat

Gold price news, and analysis

• The US dollar falls as markets price in interest rates cuts
• The gold price rallies to a multi-week high

The US dollar price has witnessed a decline of around 3% since the release of the US inflation report for October. Both headline and core inflation levels came in lower than expected. The weakening of the US labor market, as indicated by the October jobs report, has cast doubts on the Federal Reserve’s inclination to raise interest rates. This has reinforced the market’s belief that US interest rates have peaked and are unlikely to experience any further increases.

The anticipated trend of declining gross domestic product during the fourth quarter of the year suggests that the growth rate of the American economy is likely to be less than the robust 4.9% growth seen in the third quarter. A significant contributor to this decline is the contraction in consumer spending, evident in the retail sales data which contracted by -0.1%. However, there is an expectation that consumer spending rates may experience a temporary rebound, especially after the American Thanksgiving holiday, followed by Black Friday sales and the Christmas season, typically characterized by increased spending.

Market watchers will closely monitor retail sales data for November and December. A substantial decline in spending during this period would be viewed negatively for the overall growth of the US economy. Such a scenario might prompt the Federal Reserve to consider accelerating the pace of interest rate cuts, deviating from previous expectations.

Gold Price Daily Chart

Chart source ADSS Platform

Gold prices have experienced a boost due to the decline in US dollar prices, reaching their highest levels in several weeks and nearing the $2,000 per ounce threshold. Currently trading within the range of 1949 to 2009, the precious metal may be poised to test the high end of this zone. A daily close above the high end could indicate a potential continuation of its ascent toward 2030, although traders should consider the possibility of a bounce at the resistance level around 2022.

Conversely, a reversal in the price trend with a daily close below the lower limit of the mentioned trading zone might prompt some traders to press the gold price towards the support area between 1911 and 1916. Nonetheless, the support level located at 1933 should be considered.