Gold price retreats below $4,350… reasons why the downside remains solid amid bearishness

gas_fee_therapist · 2026-01-06T15:11:17+00:00

Gold (XAU/USD) has entered a short-term correction, retreating to around $4,350 amid profit-taking and short-selling. Lower-than-expected U.S. CPI is raising expectations for rate cuts, while geopolitical tensions provide some support. Despite the dip, technical indicators suggest a bullish trend may continue if prices remain above $4,300.

gas_fee_therapist

2026-01-06 15:11:17

Abstract generation in progress

Gold(XAU/USD) fell below the $4,350 mark in early Asia, entering a short-term correction phase. Recently, after a sharp rally, profit-taking and short-term long liquidations have led to a bearish trend. However, the market assesses that the bottom remains solid during the decline.

Inflation Negative Factors Actually Act as Bullish Catalysts

The US November CPI data significantly missed expectations, complicating the situation. CPI rose 2.7% year-over-year, well below the market consensus of 3.1%, and core CPI excluding volatile items also came in at 2.6%, compared to the expected 3.0%.(This signals that inflation is cooling faster than expected. This naturally increases the likelihood of the Fed implementing additional rate cuts. BMO Capital Markets analysts evaluate that this inflation slowdown could realize an additional easing scenario in 2026.

Furthermore, President Donald Trump mentioned “a person who views interest rates significantly lower” regarding the upcoming Fed chair appointment, adding a political variable. As inflation cools, the bearish factors for gold diminish.

However, the market remains cautious about a rate cut in January. According to CME FedWatch, the probability of a rate cut in January is around 26.6%, indicating limited expectations for an imminent cut.

Geopolitical Tensions Support Gold’s ‘Insurance Premium’

Another reason for the limited decline in gold is geopolitical risk. According to The New York Times, the Venezuelan government has instructed naval escorts for oil tankers. This, combined with Trump’s mention of a ‘blockade,’ could escalate tensions.

Such geopolitical uncertainties highlight gold’s safe-haven value. Even as inflation declines and expectations for rate cuts grow, risk-asset aversion demand continues to support gold.

Technical Outlook: Uptrend Maintained, Breakthrough of $4,352 Key

Despite the short-term correction, the technical picture remains bullish. The four-hour chart shows an uptrend with higher highs and higher lows, and prices are defended above the 100-period EMA.

The Bollinger Bands are widening, and RSI remains above the neutral line, indicating that the overall bias favors further upside:

Upper Targets

First hurdle: $4,352 )Bollinger Band upper(
Possible retest of the all-time high at $4,381 upon breakout
Above that, psychological resistance at $4,400

Support Levels

Immediate check: $4,300 )December 17 low(
If broken, next support at $4,271 )December 16 low(
Final defense: 100-day EMA at $4,242

Today’s Variable: University of Michigan Consumer Sentiment Index

The key variable today is the University of Michigan Consumer Sentiment Index for December, to be released on Friday. How this sentiment indicator reflects inflation expectations could determine the short-term direction of the dollar and gold.

In conclusion, gold shows weakness amid a framework of inflation slowdown leading to rising rate cut expectations, but geopolitical tensions and technical bullishness support the downside. If this correction ends above $4,300, the bullish trend is likely to continue.

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