Gold prices dip in face of strengthening US Dollar

• Gold slightly down in late trading, still up 0.40% for the week amid geopolitical tensions.
• Mixed US economic data; higher Housing Starts, lower Building Permits minimally impact Bullion.
• Fed Governor Waller’s dovish comments suggest potential for early rate cuts.

Gold’s price dropped late in the North American session, but it is set to finish the week with gains of over 0.40% as market players await the inauguration of US President-elect Donald Trump. Although the XAU/USD trades at $2,701, down 0.44%, investors continued to buy the golden metal due to political uncertainty.

The precious metal continues to be driven by geopolitics and politics in the United States (US). Although US Treasury bond yields in the belly of the curve remained unchanged, Bullion buyers failed to push prices higher to book additional gains ahead of the weekend.

The US economic schedule showed that Housing Starts jumped double digits, though Building Permits contracted in December. Gold barely reacted to the news, as most of the data revealed during the week, led by Retail Sales featured on Thursday, suggest the economy is solid.

The US Dollar Index (DXY), which tracks the USD’s performance against a basket of six peers, surged 0.35% to 109.34.

Other data revealed during the Asian session showed that China’s economy hit a 5% Gross Domestic Product (GDP) growth rate in 2024, according to the National Bureau of Statistics.

On Thursday, Fed Governor Christopher Waller tilted dovish and commented that the US central bank could lower borrowing costs sooner and faster if the disinflation process evolves.

Market participants are pricing in near-even odds that the Fed will cut rates twice by the end of 2025 and see the first reduction in June.

Source: Prime Market Terminal

Next week, the US economic docket will feature the US Presidential Inauguration, the release of Initial Jobless Claims and Flash PMIs data.

Daily digest market movers: Gold price pressured ahead of the weekend

• Gold fell as real yields remained firm on Friday. Measured by the 10-year Treasury Inflation-Protected Securities (TIPS) yield, was virtually unchanged at 2.18%.
• The US 10-year Treasury bond yield was unchanged at 4.618%, a headwind for the golden metal.
• US Housing Starts jumped from 1.294 million to 1.499 million in December, a jump of 15.8% MoM.
• Building Permits for the same period shrank as permits dipped from 1.493 million to 1.483 million, a 0.7% drop.
• The latest inflation data and Fed Waller’s comments pressured the US Dollar, as traders had grown confident the Fed would cut rates sooner rather than later. Waller didn’t rule out a cut in the March meeting as inflation “is getting close to what our 2% inflation target would be.”

XAU/USD technical outlook: Gold hold firm near $2,700

Gold prices fell amid the lack of catalysts ahead of the weekend. Nonetheless, buyers must keep XAU/USD’s prices above $2,700, so they can remain hopeful of pushing the yellow metal toward the December 12 high of $2,726. Once surpassed, the next stop would be $2,750, followed by the all-time high at $2,790.

On the other hand, buyers’ failure to achieve the previously mentioned outcome could mean Gold might test the January 13 swing low of $2,656, followed by the confluence of the 50 and 100-day Simple Moving Averages (SMAs) at $2,639 – $2,642.