Gold Price Forecast: XAU/USD gains momentum below $2,040, eyes on the Chinese data

Gold price (XAU/USD) extends the rally during the early Asian trading hours on Friday. The softer US Dollar (USD) and lower US Treasury bond yield boost the yellow metal. The gold price currently trades around $2,035, gaining 0.02% on the day.

Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a weighted basket of currencies used by US trade partners, drops below the 102.00 mark. The Treasury yields edge lower, with the 10-year yield falling to 3.92%

The dovish comments from the Federal Reserve (Fed) drag the US Dollar (USD) lower and benefit USD-denominated gold. On Wednesday, the Federal Open Market Committee (FOMC) decided to keep the benchmark overnight borrowing rate in a targeted range between 5.25% and 5.5%. Additionally, the committee’s dot-plot projection foresees three rate cuts in 2024, or half of what the markets had priced in 2024.

Data from the Census Bureau revealed on Thursday that US Retail Sales grew 0.3% in November from a 0.2% drop in October, better than the market expectation of 0.1%. The upbeat data suggests that the Fed is not likely to cut rates as quickly and as much as the markets now have priced in. However, the data failed to lift the Greenback against its rivals.

Apart from this, the World Bank said in a report released on Thursday that China's economy would slow down next year, with annual growth dropping to 4.5% from 5.2% this year, despite a recent recovery fueled by investments in factories and construction, as well as increased demand for services. The outlook is subject to considerable downside risks and highlights the need for government support to improve confidence in the economy.

Looking ahead, market players will monitor China’s Industrial Production and Retail Sales for November, which are expected to improve. Later on Friday, the US S&P Global PMI, Industrial Production, and NY Empire State Manufacturing Index will be released. Traders will take cues from these figures and find trading opportunities around the gold price.