Gold Price Forecast: XAU/USD remains under pressure below $2,030, eyes on Chinese data, US Retail Sales

• Gold price drifts lower to $2,025 on the higher USD and US yields. 
• Fed’s Waller said the central bank should lower the rates methodically and carefully when the time is right. 
• The rising geopolitical tension in the Middle East boosts the traditional safe-haven like gold. 
• The Chinese Industrial Production, Retail Sales, and Q4 GDP growth numbers will be released ahead of the US Retail Sales.

Gold price (XUA/USD) remains under pressure below the mid-$2,000s during the early Asian session on Wednesday. The ongoing US Dollar (USD) demand and higher US Treasury yields drag the yellow metal lower. At press time, the gold price is trading at $2,025, losing 0.09% for the day. 

The US Dollar Index (DXY), a measure of the value of the USD against a weighted basket of currencies used by US trade partners, extends its upside to new YTD peaks past the 103.30 mark. The US Treasury yields edge higher, with the 10-year yield standing at 4.05%.

Federal Reserve (Fed) Governor Christopher Waller said on Tuesday that the Fed will be able to lower the target range for the federal funds rate this year. Waller added that when the time is right to begin cutting rates, they should be lowered methodically and carefully. According to the CME FedWatch tool, the markets are pricing in 67% odds that the FOMC will begin cutting the rate in March. However, traders had further ramped up expectations for 2024 to seven cuts but brought it back to six after Waller’s comments.

Iranian-backed Houthi militants in Yemen have begun a new series of attacks in shipping lanes critical for global trade, damaging a US-owned commercial ship on Monday after attempting to hit an American warship the day before. The escalating geopolitical tension in the Middle East raises concerns over supply disruptions and benefits traditional safe-haven assets like gold. 

China’s Premier Li Qiang said on Tuesday that the economy grew by around 5.2% in 2023, surpassing the government’s official growth target for the year without relying on massive stimulus. Nonetheless, the Chinese economic data on Wednesday will be the highlight. China’s Industrial Production is estimated to remain steady at 6.6% in December YoY, while Retail Sales are projected to ease to 8% YoY in December from 10.1% in the previous reading. 

Traders will keep an eye on the Chinese economic data and attention will shift to the December US Retail Sales, due later on Wednesday. The figure is expected to show an increase of 0.4% MoM versus 0.3% prior. These figures could give a clear direction to the gold price.