Gold Slides as Risk-On Mood Dampens Safe-Haven Demand; Downside Appears Limited
Gold prices retreated during the Asian session on Tuesday, snapping a two-day winning streak. However, selling pressure remained muted, with the precious metal showing resilience below the psychological $5,000 level amid mixed market signals. The outcome of Japan’s snap election on Sunday reduced political uncertainty, while easing tensions in the Middle East continued to underpin broader risk appetite and support optimistic market sentiment.
XAU/USD Technical Outlook
The 21-day Simple Moving Average (SMA) has crossed above the 50-, 100-, and 200-day SMAs, reinforcing strong bullish momentum. Prices remain comfortably above all rising moving averages, with the 21-day SMA at $4,896.01 providing nearby dynamic support.
The Relative Strength Index (RSI) stands at 56.89, hovering in neutral territory after easing from overbought conditions, suggesting balanced momentum rather than exhaustion.
On the downside, the 50-day SMA at $4,580.73 and the 100-day SMA at $4,310.62 serve as successive support levels, while the 200-day SMA at $3,847.79 underpins the broader uptrend. As long as prices stay above the short-term SMA support, pullbacks are likely to be absorbed, keeping the bullish bias intact.
Fundamental Overview
Markets are pricing in a slowdown in U.S. consumer retail spending for December, reinforcing expectations of a softening labor market. Attention now turns to the delayed but highly anticipated U.S. Nonfarm Payrolls (NFP) report, scheduled for release on Wednesday.
According to Reuters, White House Economic Adviser Kevin Hassett stated on Monday that U.S. job growth could slow in the coming months due to weaker labor force expansion and stronger productivity gains.
These potentially softer U.S. fundamentals are strengthening expectations that the Federal Reserve could deliver its first interest rate cut of the year as early as June. Against this backdrop, the U.S. Dollar remains on the defensive after posting sharp losses on Monday. Analysts note that media reports suggesting China has urged local banks to diversify away from U.S. Treasuries have also weighed on the Greenback.
Despite the bearish tone surrounding the USD, gold struggled to capitalize as traders locked in profits following a $425 rebound and positioned cautiously ahead of upcoming high-impact U.S. macroeconomic releases later this week.
Following Wednesday’s labor data, inflation will take center stage, with the Federal Reserve facing a delicate policy trade-off. The U.S. Consumer Price Index (CPI) report is due on Friday and could prove pivotal for gold price direction.