Gold slumps amid strong US Dollar after US CPI

• Gold retreats amid stable US inflation data, continuing a four-day losing streak.
• US Dollar Index reaches a year-to-date high of 106.52, buoyed by market expectations of less dovish Fed.
• Upcoming economic events, including Fed Chair Powell's speech and US Retail Sales, to further influence Gold's trajectory.

Gold's price tumbled on Wednesday following October’s inflation report, which was aligned with estimates. The yellow metal hit a daily peak of $2,618 but retreated as US Treasury yields climbed, and the Greenback extended its gains to a new year-to-date (YTD) high, according to the US Dollar Index (DXY). The XAU/USD trades at $2,581, losing more than 0.60%.

Bullion extended its losses for the fourth straight day after the US Bureau of Labor Statistics (BLS) revealed that headline and core inflation figures for October came in as Wall Street expected.

The buck printed solid gains, although market participants had almost entirely priced in 25 basis points by the Federal Reserve (Fed) at the December meeting. According to the CME FedWatch Tool data, odds rose from 58% a day ago to 82%.

The DXY, which tracks the performance of the US Dollar against a basket of peers, hit a YTD high of 106.52, surpassing the April 16 high of 106.51. As of writing, the DXY hovers around 106.49, gaining 0.50%.

US Treasury bond yields continued to rise with the 10-year benchmark note yielding 4.453%, two and a half basis points above its opening yield.

Market participants remain aware that Trump's presidency might dent the Fed from easing policy if inflation climbs due to low taxes and new tariffs.

Looking forward to this week, traders are eyeing Fed Chair Jerome Powell's speech. The US Producer Price Index (PPI) and jobs data are due on Thursday. On Friday, Retail Sales will update the status of American consumers.

Daily digest market movers: Gold remains pressured by a firm US Dollar

• Gold prices fell as US real yields, which inversely correlate against Bullion, edged up one basis point to 2.089%.
• The US CPI rose as anticipated to 2.6% YoY, up from 2.4%, with a 0.2% monthly increase as expected.
• Core CPI also aligned with forecasts, rising 3.3% annually and 0.3% on a monthly basis, matching private analyst projections.
• Minneapolis Fed President Neel Kashkari stated that the US central bank would need to lower borrowing costs, adding that inflation heads “in the right direction.”
• Echoing some of his comments was the Dallas Fed’s Lorie Logan, stating the US central bank “most likely” needs to reduce its restrictive policy, though it must proceed cautiously.
• St. Louis Fed’s Alberto Musalem said that although inflation data was stronger, it doesn’t change his view that policy is on path to neutral.
• Kansas City Fed Jeffrey Schmid was more cautious, saying “it remains to be seen” how much more the Fed will cut rates.
• According to the Chicago Board of Trade’s December fed funds rate futures, investors now anticipate approximately 23 basis points of Fed easing by the close of 2024.

XAU/USD Technical Outlook: Gold price tumbles below $2,600

The Gold price has shifted neutral to bearishly biased, once it cleared the October 10 swing low of $2,603. Once bears achieved a daily close below the latter, it opened the door to challenge the 100-day Simple Moving Average (SMA) at $2,540. On further weakness, the next support would be $2,500.

On the other hand, if Gold clings to $2,600, buyers will eye the 50-day SMA at $2,647, ahead of $2,650. Once surpassed, the next resistance would be the November 7 high at $2,710.

Momentum has shifted bearishly as the Relative Strength Index (RSI) distanced itself from its neutral line, indicating that XAU/USD might extend its losses.