Gold corrected back on Tuesday after the release of stronger-than-expected US Retail Sales data for June. Prior to this, Gold had been rallying following optimistic comments made by Fed Chairman Jerome Powell regarding progress on inflation. Market-based probabilities are now showing a 100% chance of the Fed cutting interest rates at the upcoming September meeting. The release of US Retail Sales data indicated that the US consumer is continuing to spend despite the high cost of borrowing, suggesting that the US economy remains resilient. Inflation is likely to stay relatively elevated, which could moderate the extent to which the Fed cuts interest rates in the future, impacting Gold prices.
Gold had been inching towards its all-time high of $2,451 before the release of the US Retail Sales data. Market expectations of a rate cut by the Federal Reserve in September were supported by signs of cooling inflation in the US. Following the release, Gold pulled back as the data showed a rise of 0.0% in Retail Sales for June, in line with expectations. However, the Retail Sales ex Autos data rose by 0.4% in June, surpassing earlier estimates. The Retail Sales Control Group also showed an increase of 0.9%, indicating consumer confidence and spending levels.
Gold had initially risen earlier on Tuesday after Fed Chairman Jerome Powell’s comments on inflation progress and potential interest rate cuts. Powell’s remarks led to a significant change in market expectations, with the CME FedWatch tool now pricing in a 100% chance of a rate cut in September. Previous inflation data in the form of CPI and PCE had fallen below expectations, setting the stage for potential rate cuts. Gold is currently rising within a range and is approaching its May all-time high, indicating a sideways consolidation within a broader uptrend.
Gold’s technical analysis suggests a short-term sideways trend with a floor at $2,280 and a ceiling at $2,451. The precious metal has received bullish confirmation after breaking above the June peak and is set to target the all-time high. In the long term, Gold remains in an uptrend, indicating potential for a breakout to the upside. A decisive break above the $2,451 high could lead to a target at $2,555, calculated by extrapolating the Fibonacci ratio of the range higher.
The Retail Sales ex Autos data released by the US Census Bureau on a monthly basis measures total retail and food store receipts in the US, excluding motor vehicles and parts. This data is a key indicator of consumer spending, which drives the US economy. A high reading is seen as bullish for the USD, while a low reading is bearish. The recent release showed a 0.4% increase in Retail Sales, higher than the consensus, indicating strong consumer spending levels despite economic uncertainties.
In conclusion, Gold corrected back on Tuesday after the release of US Retail Sales data, which indicated a robust consumer spending trend in the US. Despite initial optimism fueled by Powell’s comments on inflation progress and potential rate cuts, Gold experienced a pullback following the release of the data. The market is now focused on the upcoming Fed meeting in September, with a high probability of interest rate cuts. Technical analysis suggests a short-term sideways trend for Gold, with potential for an eventual breakout to the upside. The Retail Sales ex Autos data is closely monitored for insights into consumer spending trends and their impact on the US economy.
