On February 12, gold prices rose on Wednesday following weak U.S. retail sales data, which fueled bets that the world's largest economy is cooling. Market focus is now shifting to the upcoming non-farm payrolls report for clearer direction.

Despite gains this week, the precious metal has remained volatile and struggled to recover since its sharp decline from record highs in late January. Recent dollar weakness and soft U.S. economic data have provided only limited support. Geopolitical uncertainty in the Middle East has also continued to weigh on gold's safe-haven appeal.

Weaker-than-expected December retail sales data led to a softer dollar and higher metal prices. Analysts at ANZ noted that gold's earlier rally stalled due to market concerns that it had risen "too far, too fast." They added that with speculative positions largely cleared out, traders are now looking for the next catalyst to drive prices higher, and weak U.S. economic data has triggered some buying.

Tuesday's retail sales figures indicated that broad consumer spending in the world's largest economy is cooling amid persistent inflation and a strained labor market. Sustained consumer weakness could signal a deteriorating economic outlook, which in turn may prompt the Federal Reserve to implement further interest rate cuts this year to support growth. In response to this view, U.S. Treasury yields fell, while the dollar struggled to rebound from Monday's steep decline. During Wednesday's Asian trading session, the dollar index fell 0.2%, extending its losses from the start of the week.

The non-farm payrolls data, due later on Wednesday, are expected to provide more definitive clues. Any signs of continued labor market weakness could increase bets on rate cuts, as lower borrowing costs typically benefit non-yielding assets like gold. However, uncertainty still prevails regarding monetary policy, particularly after former President Trump nominated Kevin Warsh as the next Fed chair. Warsh is viewed as a less dovish candidate, and this expectation contributed to the metals market's sharp downturn since late January. Beyond employment data, market attention this week will also focus on Friday's CPI inflation report, as labor market strength and inflation are two key factors influencing the Fed's interest rate decisions.