Precious Metals Forecast: Gold Retreats Amid Dollar Strength and Position Unwinding

Market Overview

Gold price slipped beneath the $4,350 level during Asian trading hours on Thursday, retreating from recent seven-week highs as investors booked profits and the US Dollar strengthened. The precious metal faced headwinds from position unwinding activity, though underlying support factors remain intact for the broader precious metals market.

Key Market Drivers Shaping Gold’s Direction

Recent employment data has reinforced market expectations for additional interest rate cuts from the Federal Reserve, creating a mixed backdrop for the yellow metal. Lower borrowing costs typically reduce the opportunity cost of holding non-yielding assets like gold, potentially acting as a floor for prices. Separately, escalating geopolitical tensions—specifically Venezuela’s decision to deploy naval forces to protect petroleum shipments amid US blockade threats—continue to bolster safe-haven demand for precious metals.

The focal point for traders remains the US Consumer Price Index (CPI) inflation release scheduled for Thursday. Market consensus points to headline CPI rising 3.1% year-over-year in November, while core inflation is projected at 3.0% year-over-year. Additionally, Initial Jobless Claims data will be published later in the session, providing further insight into labor market dynamics.

Economic Data Landscape

The Fed’s policy trajectory has become increasingly nuanced. Fed Governor Christopher Waller signaled openness to additional rate reductions to normalize policy settings, though cautioned against premature action given persistent inflation concerns. In contrast, Atlanta Fed President Raphael Bostic expressed skepticism about near-term cuts, indicating rate decreases are unlikely unless inflation trends decline meaningfully.

November’s employment report revealed Nonfarm Payrolls increased by just 64,000 positions following a revised 105,000 decline in October, while the unemployment rate ticked up to 4.6% from 4.4%. These softer labor metrics have shifted federal funds futures pricing, with markets now assigning a 31% probability to a December rate cut, up from 22% pre-data.

Technical Perspective on Precious Metals

On a four-hour timeframe, gold maintains constructive underpinnings despite intraday weakness. The precious metal continues trading above the critical 100-day Exponential Moving Average, signaling a constructive bias. Widening Bollinger Bands paired with a Relative Strength Index reading above the midline suggest upside momentum remains favored.

Should buying interest resume above the $4,352 upper band level, gold could target the all-time high of $4,381, with the $4,400 psychological threshold representing the next meaningful objective. Conversely, if sellers establish control and prices close below the December 17 support at $4,300, downside exposure extends toward the December 16 low of $4,271, with the 100-day EMA at $4,233 serving as an additional floor to monitor.

The technical setup for precious metals continues to favor long-term buyers, though near-term consolidation around current levels appears likely pending Thursday’s inflation data.