• Gold price is set to finish the week with losses of around 1.60%, below $1,850.
  • US CPI and PPI figures reignite investors’ worries about a hawkish Federal Reserve.
  • Solid Retail Sales and Jobless Claims data show the robustness of the US economy.
  • Investors estimate the Federal Fund Rates will be above the 5.0% threshold by July 2023.

Gold spot price tumbled for the third day of the week, down almost 0.65% in the aftermath of incoming US economic data, which turned sentiment sour on speculations that further Federal Reserve (Fed) tightening is on it’s way. At the time of writing, the XAU/USD is trading at $1,838.70.

Inflation in the United States justifies Federal Reserve officials’ hawkish comments

US equities are trading with losses on risk aversion. Economic data revealed an uptick in inflationary pressures in the United States (US) on St Valentine’s Day. Although the US Consumer Price Index for January came in short of the previous month’s readings, the data still exceeded forecasts.

Staying on the the theme of inflation, last Thursday’s PPI data jumped in the monthly, headline and core readings.

Given this backdrop, the US Federal Reserve’s (Fed) job on inflation is not yet done. A message reiterated by Fed officials on Thursday, including Cleveland Fed President Loretta Mester and St. Louis Fed James Bullard. All in all it’s a bad sign for Gold. 

American consumers are still spending, bolstered by the labor market

Additional data pointed to a robust economy in the US, as Retail Sales surprisingly jumped 3.0%, vs. estimates of 1.8%, following two months of contraction, giving the Fed more leeway to continue lifting interest rates.

The US Bureau of Labor Statistics (BLS) revealed that Initial Jobless Claims for the week ending February 11 increased by 194K, below the prior’s week 196K and short of the 200K foreseen by economists.

Investors estimate the Fed will lift rates above 5.30%

Investors have begun to reprice how far the Fed will raise rates as the tightening cycle continues.

Money market futures show the Federal Fund Rates (FFR) climbing above 5.3% in July vs. 4.9% a couple of weeks ago. Therefore, US Treasury bond yields, particularly the US 10-year benchmark note rate, although falling during the session, jumped ten bps, at 3.838%.

The Greenback benefited from the jump in yields, with the US Dollar Index (DXY) back above the 104.00 mark, up in the week by 0.44%.

Gold technical analysis

Of late, XAU/USD found a respite after hitting a low of $1,818.97, around the 100-day Exponential Moving Average (EMA) at $1,819.49, with buyers entering in and dragging prices higher.

Even though the XAU/USD remains neutral to upward biased, sellers could step in around the 50-day EMA at $1,854.27 as a solid resistance area. Still, a daily close above the December 27 daily high-turned-support at $1,833.29 could pave the way for consolidation in the $1,830-$1,850 area. Otherwise, a bearish continuation toward the 100-day EMA is on the cards.