Gold adjusts amid profit-taking pressure; US inflation data is the key tonight

Gold (XAU/USD) oscillated and retreated during Thursday’s Asian session, breaking below the $4,350 level. This decline was mainly driven by two forces: first, the surge in profit-taking recently; second, the resistance from the rebound of the US dollar. However, concerns over the Fed’s policy shift and geopolitical tensions still provide some downside support for precious metals.

Technical Outlook Remains Bullish, Uptrend Intact

From the four-hour chart, although gold faces short-term pressure, the overall technical structure remains positive. The precious metal’s price stays above the 100-day exponential moving average, indicating that the medium-term uptrend is still valid. The Bollinger Bands are expanding, and the RSI (14) is above the midline, suggesting that bullish momentum still has room to run.

The path of least resistance points upward. If a reversal confirmation signal appears and the price stabilizes above the upper Bollinger Band at $4,352, gold could attempt to retest the recent high at $4,381 and target the $4,400 round number. Conversely, if selling pressure persists, support levels to watch include the December 17 low at $4,300 and the 100-day moving average near $4,233.

Fundamental Factors Clash Intensely

The Federal Reserve’s stance shows subtle divergence. Governor Christopher Waller on Wednesday leaned toward further easing, advocating a return to neutral interest rates. Meanwhile, Atlanta Fed President Raphael Bostic remains cautious, stating that unless inflation clearly declines, there is no room for rate cuts next year.

On the employment front, non-farm payrolls increased by only 64,000 in November, showing some improvement from the decline of 105,000 in October, but the growth was well below market expectations. The unemployment rate rose from 4.4% to 4.6%. Fed funds futures pricing indicates that the market now assigns a 31% probability of a rate cut next month, up from 22%.

A lower interest rate environment reduces the opportunity cost of holding non-yielding gold, providing positive support for gold prices. Meanwhile, Venezuela’s navy escorting oil tankers to counter US sanctions has heightened geopolitical tensions. The resurgence of risk aversion also benefits traditional safe-haven assets like gold.

US CPI Data Tonight Will Be the Decisive Factor

Traders are focusing on the upcoming US November CPI inflation data. The market expects a year-over-year increase of 3.1%, with core CPI at 3.0%. Additionally, the US initial jobless claims report will be released Thursday evening.

If inflation data exceeds expectations, it could further dampen expectations for rate cuts, strengthening the dollar and possibly intensifying profit-taking in gold. Conversely, if the data falls short, it will reinforce easing expectations and potentially push gold prices higher again. The inflation report is undoubtedly the most important catalyst for determining gold’s direction today.