Gold Price Forecast: XAU/USD traders look to cash in ahead of US Retail Sales, Fed rate call

Gold retreats from lifetime highs shy of $3,700 as traders cash in early Tuesday.
US Dollar sellers refuse to give up amid calls for aggressive Fed easing and Miran’s confirmation.
Gold remains in the overbought region on the daily chart; a brief correction on the cards?

Dhwani Mehta FXStreet

Gold has paused its record run early Tuesday, as traders cash in on their long positions, gearing up for the top-tier US Retail Sales data and the US Federal Reserve (Fed) policy meeting, starting later in the day.

Gold down but not out as eyes turn to the Fed

Despite the latest pullback, Gold’s bullish bias remains intact amid increased calls for aggressive easing by the Fed, in light of growing stagflation risks and the Senate confirmation of US President Donald Trump’s pick, Stephen Miran, as a Fed Governor.

Miran replaces Adrian Kuglar and will be on the Fed Board until January.

Meanwhile, Trump, in a social media post on Monday, called for Fed Chairman Jerome Powell to enact a "bigger" cut to benchmark interest rates.

Further, geopolitical and trade tensions continue to underpin the haven demand for the yellow metal.

Trump said late Monday that trade talks with China are still ongoing, adding that he is “undecided on the TikTok stake.”

The US president also “declared his intention to forcefully insert military forces under his control into cities that he personally deems require it,” per FXStreet’s Analyst Joshua Gibson.

Meanwhile, geopolitical tensions between Israel and Hamas intensify as Israeli Prime Minister Benjamin Netanyahu refused to rule out further attacks on Hamas leaders in foreign countries, following last week's strike in Qatar.

Looking ahead, attention turns to the high-impact US Retail Sales data on Tuesday and the Fed policy announcements on Wednesday for a fresh directional impetus to Gold.

In the meantime, a brief profit-taking decline cannot be ruled out in Gold as markets resort to repositioning after the recent record rally and ahead of the Fed verdict.

The Fed is widely expected to cut fed fund rates by 25 basis points (bps) as the central bank grapples with a slowing labor market, stubborn inflation and an unprecedented push by US President Donald Trump for lower borrowing costs

Speculations are rife over a 50 bps rate cut, while markets are also betting on three rate cuts this year, beginning this week. Gold tends to benefit in a low-interest rate regime.

Gold price technical analysis: Daily chart

The daily chart shows that Gold buyers appear defiant even as the 14-day Relative Strength Index (RSI) remains in the extreme overbought zone, near 80.

On the upside, the $3,700 level is the immediate barrier to conquer, above which doors will open up toward the $3,750 region.

To the downside, the previous day’s low at $3,627 will offer some support on further pullback, below which the $3,600 round figure will be tested.

Sellers could target the previous week’s low of $3,578 on a decisive break below the $3,600 threshold.

Economic Indicator

Retail Sales (YoY)

The Retail Sales data, released by the US Census Bureau on a monthly basis, measures the value in total receipts of retail and food stores in the United States. Retail Sales measure the change in the total value of goods sold at the retail level during a year. Retail Sales data is widely followed as an indicator of consumer spending, which is a major driver of the US economy. A result higher than expected is typically viewed as positive or bullish for the USD, whereas a lower than expected result is considered negative or bearish for the USD.

Why it matters to traders?

Retail Sales data published by the US Census Bureau is a leading indicator that gives important information about consumer spending, which has a significant impact on the GDP. Although strong sales figures are likely to boost the USD, external factors, such as weather conditions, could distort the data and paint a misleading picture. In addition to the headline data, changes in the Retail Sales Control Group could trigger a market reaction as it is used to prepare the estimates of Personal Consumption Expenditures for most goods.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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