Gold bears back in control on dialled back Fed cuts expectations, targets below $1,400
|- Gold prices headed for a test of a key technical confluence level.
- Bears can look to the 38.2% Fibo retracement further south around 1375.
Gold prices have been whipsawed on Tuesday following yet further signs of a robust U.S. economy in the data of late. W have seen better than expected Consumer Price Index, Producer Price Index and now Retail Sales. We also have the Fed's Beige Book this week and an upside surprise in those descriptions of the economy will be an additional boost for the bulls.
US June retail sales look very strong with the “core” retail sales control group rising 0.7% month-on-month (consensus 0.3%) with upward revisions to the history. This data also suggested the market is too aggressive in terms of pricing for interest rate cuts. As a result, gold is sinking and the dollar is climbing.
The price of gold found a brief respite from the supply when Powell's speech hit the wires which included much of the same mantra as we have heard from a dovish set of Federal Reserve speakers, but even then, the price was rejected by the bears which have now gone into overdrive considering the improved geopolitical backdrop of late and Chinese data which surprised to the upside.
As expected, China Gross Domestic Produce rose by 6.2% over the year to June 2019. A step-down from 6.4%yr in March 2019 and December 2018, the result puts the economy on track to achieve full-year growth at the bottom end of authorities’ 6.0–6.5% 2019 target range. However, the upside surprises came from China’s Industrial Production and Real Retail Sales growth that has continued to recover. IP grew surprisingly strongly in June – increasing by 6.3% YoY, compared with just 5.0% in May while Retail Sales was increasing by 7.5% YoY (compared with 6.4% in May) coupled with Consumer t levels that are historically high.
Then, just today, according to The Washington Times, at a Cabinet meeting at the White House, Pompeo said the Iranians have told the U.S. that they are ready to negotiate on their missile program. This follows the fears that the nations supreme Leader had highlighted that the country is further reducing its commitments to the nuclear deal and Khamenei's threat to retaliate against the UK for the seizure of an Iranian oil tanker. Indeed, all in all, things are looking a little brighter for risk assets and gold is suffering to hold on to $1,400 the figure.
Gold levels
Technically, if 1400 gives way, with the confluence of the 23.6% Fibo of the latest swing lows and highs, we are looking down the barrel at 1373/76 area which meets the 19th June spike correction lows and the 38.2% Fibo of the same swing ranges.
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