Gold Prices Hold Above $5,000 After Weak US Retail Sales Data

TLDR

• Gold prices held above $5,000 per ounce after weak US retail sales data increased expectations for Federal Reserve interest rate cuts
• The precious metal climbed 0.9% following December consumer spending data that showed an unexpected stall in economic activity
• Gold dropped 13% in two sessions after hitting a record high above $5,595 per ounce in late January but has recovered about half those losses
• BNP Paribas predicts gold will reach $6,000 by year-end, with Deutsche Bank and Goldman Sachs also issuing bullish forecasts
• Investors await Wednesday’s nonfarm payrolls report and Friday’s consumer price index data for further direction on Fed policy

Gold prices held steady above the $5,000 per ounce mark as traders digested weak US economic data that strengthened the case for interest rate cuts. Spot gold rose 0.6% to $5,052.11 an ounce during Asian trading hours on Wednesday.

The gains came after December retail sales data showed consumer spending unexpectedly stalled. The disappointing figures suggested the world’s largest economy may be cooling down.

Silver prices also advanced during the session, climbing 3.4% to $83.5555 per ounce. Platinum and palladium both gained more than 2% as investors sought alternatives to traditional assets.

The US dollar declined for a fourth consecutive day, falling 0.3% and down 1.3% over the four-day period. A weaker dollar makes gold cheaper for buyers using other currencies.

US 10-year Treasury bond yields dropped to their lowest level in nearly a month. Lower yields typically support gold prices since the precious metal does not pay interest.

Manav Modi, an analyst at Mumbai-based Motilal Oswal Financial Services, said the fall in yields helped lift gold prices. Bullion becomes more attractive when yields on other investments decline.

Recent Price Volatility

Gold reached a record high above $5,595 per ounce in late January. The rally was driven by geopolitical concerns, attacks on Federal Reserve independence, and shifts away from traditional currencies and sovereign bonds.

However, the rapid rise triggered a wave of speculative selling. The precious metal plunged approximately 13% over just two trading sessions.

Gold has since recovered about half of those losses. Prices have traded around the $5,000 level throughout this week.

Ahmad Assiri, an analyst at Pepperstone Group, said much of the speculative positioning has been removed from the market. This reduces the risk of extreme price swings in the near term.

Assiri suggested that subdued volatility could provide the foundation for the next move higher. Many major banks maintain bullish outlooks for gold prices.

Bank Forecasts and Fed Policy

BNP Paribas expects gold to reach $6,000 per ounce by the end of 2026. Deutsche Bank and Goldman Sachs have also issued positive forecasts for the precious metal.

The outlook for Federal Reserve policy remains a key factor for gold prices. President Donald Trump nominated Kevin Warsh as the next Fed chairman.

Warsh has previously advocated for additional rate cuts. Lower interest rates generally benefit gold and other non-yielding assets.

However, Federal Reserve Bank of Cleveland President Beth Hammack said Tuesday that interest rates could remain on hold for an extended period. Officials plan to evaluate incoming economic data before making policy decisions.

Traders are now focused on Wednesday’s nonfarm payrolls report. The jobs data will provide further insight into labor market conditions.

Consumer price index inflation data is scheduled for release on Friday. Labor market strength and inflation are the Fed’s two primary considerations when adjusting interest rates.

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