Gold Prices Decline as Investors Anticipate Fed Rate Decision

Gold continues to experience downward pressure for the fourth consecutive trading session, with the most active February futures contract dropping $6.70 to settle at $2,663.50. The US dollar index marginally increased by 0.09%, reaching 106.985, reflecting evolving market dynamics.

The dollar's strength emerged from unexpectedly robust retail sales data, demonstrating continued economic momentum and heightening expectations of potential interest rate cuts by central banks worldwide. The Commerce Department reported a significant 0.7% surge in November retail sales, primarily driven by increased purchases of new motor vehicles and online transactions.

MT Newswires provided deeper insight into the economic landscape, noting that the U.S. Census Bureau's report revealed a 3.8% annualized pace of retail sales growth, surpassing the consensus estimate of 0.5%. However, when excluding gasoline and automobile sales, spending increased more modestly by 0.2%, falling short of the anticipated 0.3% rise.

The final Federal Open Market Committee (FOMC) meeting of 2024 is currently in session, with a critical announcement on benchmark interest rates expected tomorrow. Market sentiment overwhelmingly suggests a 25 basis point rate cut, with the CME's FedWatch tool indicating a 95.4% probability of such a move.

Treasury yields reflected the market's cautious sentiment, with the 2-year note yielding 4.245% after a 1.9 basis point decline, while the 10-year note experienced a 2.2 basis point drop, settling at 4.383%.

The daily Japanese candlestick chart for February gold futures reveals a pronounced correction following the all-time high of over $2,800 per ounce on October 30. After reaching a low of $2,566 on November 14, the market has been characterized by a series of lower highs and higher lows. Today's trading marked a significant technical development, with gold futures breaking below the lower-level support trendline and opening and closing beneath the previous support line of a compression triangle pattern.

This technical breakdown suggests potential continued downward pressure in the near term, with investors closely monitoring the Federal Reserve's imminent interest rate decision and its potential implications for precious metal markets.

Wishing you, as always good trading,