Gold prices climbed on Tuesday following weaker-than-expected US Retail Sales data, raising expectations of a potential rate cut by the Federal Reserve. The XAU/USD trades at $2,327, an increase of 0.51%, as investors speculated on the Fed’s easing cycle this year. The US Department of Commerce reported that May Retail Sales improved from April but fell short of estimates. This data reignited hopes for a rate cut as the Fed indicated that current monetary policy remains suitable.
In addition to economic data, Fed officials expressed mixed views on the timing of potential rate cuts. New York Fed President John Williams suggested that interest rates would gradually decline if the disinflation process continues to meet the Fed’s inflation target. Richmond Fed President Thomas Barkin remained cautious, stating that he requires more data before considering easing. Boston Fed President Susan Collins emphasized the need for caution, stating that it is not yet time to cut rates. St. Louis Fed President Alberto Musalem echoed similar sentiments, indicating the need for an evolution in the disinflation process before committing to rate cuts.
Despite neutral comments from most policymakers, US Treasury yields reflected investors beginning to anticipate rate cuts. The 10-year Treasury note yield dropped six basis points to 4.219%, indicating market expectations of potential future rate cuts. Traders on the Chicago Board of Trade anticipate 36 basis points of easing through December’s 2024 fed funds rate contract. The US Dollar Index (DXY) declined by 0.05% to 105.27, impacting Gold prices. Retail Sales for May rose by 0.1% MoM, surpassing April’s decline but falling short of estimates.
Industrial Production in May exceeded expectations, rising by 0.9% MoM. Last week’s CPI report increased the likelihood of a Fed rate cut in September, according to the CME FedWatch Tool. Despite ongoing disinflation, Fed Chair Jerome Powell expressed less certainty about progress on inflation. Gold prices, while rising, remained bearishly biased due to a bearish Head-and-Shoulders chart pattern. Support levels for XAU/USD include $2,300, $2,277, and $2,222, while resistance levels above $2,350 include $2,387 and $2,400. The technical analysis indicates a neutral to downward bias in Gold prices.
US Retail Sales data, released monthly by the US Census Bureau, measures total receipts of retail and food stores in the US. It reflects changes in sales rates, with a high reading bullish for the USD and a low reading bearish. The data is adjusted for seasonal variations and holiday differences but not for price changes. Retail Sales data is a significant indicator of consumer spending, a key driver of the US economy. The recent data release showed a 0.1% increase in Retail Sales, falling below the 0.2% expected consensus. Monthly Retail Sales data remains an essential economic indicator followed closely by investors and analysts.
