Gold Rallies Near 1% After Mixed Retail Sales

(January 16, 2025 - Filip Lagaart, FXStreet)

• Gold price rallies, breaking further, above $2,715.
• Fed rate cut expectations flair up and fueling the Bullion rally. 
• Gold sprints away and sets sail for the next important pivotal level at $2,721.

Gold’s price (XAU/USD) is rallying on Thursday in the aftermath of mixed Retail Sales and disinflationary Consumer Price Index (CPI) release on Wednesday. The rally this Thursday has been picking up speed after the actual Retail Sales number for December missed the mark by coming in at 0.4%, missing the 0.6% estimate, while the previous 0.7% got revised up to 0.8%. Gold has broken through the first big pivotal level at 2,708.00 and is on its way to $2,720.

While headline CPI accelerated compared to the previous month, core inflation rose at a slower pace than in November,  which increased the probability of a 25 basis point (bps) rate cut by the Federal Reserve (Fed) in June. According to the CME FedWatch tool, the odds of interest rates being lower than current levels after the June meeting stand at 63.8%, compared to 57.3% before the inflation data and 51.4% on Monday.

Technical Analysis: Getting hot, nearly overheating

Gold bulls face their first litmus test on the upside on Thursday, with some heavy resistance coming in around the pivotal level of $2,708, followed by $2,721. The Relative Strength Index (RSI) is steepening quite quickly in the daily chart. Risk of any overheating in the RSI momentum indicator by the time Bullion hits that $2,720 area could see a quick correction back to $2,680.

The first support is the descending trendline in the pennant chart formation, which has been discussed several times in the past few days. That level is currently around $2,671. In case more downside occurs, the 55-day Simple Moving Average (SMA) at $2,648 is the next support, followed by the 100-day SMA at $2,640.

On the upside, the October 23 low at $2,708 is the key pivotal level to watch. Once that level is cleared, $2,721, which is a sort of a double top in November and December last year, is rapidly approaching. In case Bullion powers through that level, the all-time high of $2,790 is the key upside barrier.