Gold pulls back down following release of US Retail Sales data
- Gold price falls after the release of US Retail Sales data for August.
- Traders now await the key Fed policy decision, with probabilities favoring a larger 0.50% cut to interest rates.
- Such a move would boost the attractiveness of Gold.
- Analysts call a 10-year secular bull trend starting for commodities, including Gold.
Gold (XAU/USD) pulls back to the $2,570s after the publication of US Retail Sales data for August on Tuesday – the last major US macroeconomic data release before the Federal Reserve (Fed) makes its decision on Wednesday.
US Retail Sales rose by 0.1% in August month-on-month, compared to the revised-up 1.1% rise registered in July. This was above consensus expectations of a 0.2% decline, according to data from the US Census Bureau.
US Retail Sales ex Autos, meanwhile, rose by 0.1% after a 0.4% increase in July. This was below estimates of a 0.2% rise.
The data slightly reduced the probabilities of the Federal Reserve (Fed) cutting interest rates by a larger 0.50% at its September meeting, weighing marginally on Gold. Prior to the release the probabilities stood at 67%, after the data they had changed to 65%, according to the CME FedWatch tool.
Gold surges as bets increase the Fed will double cut
Gold shot to an all-time-high (ATH) of $2,589 on Monday after market bets that the Fed will make a double-dose 0.50% cut to interest rates at its meeting on Wednesday rose sharply, according to market-based gauges.
The expectation that the Fed will slash interest rates is positive for Gold because it lowers the opportunity cost of holding the yellow metal, which is a non-interest-paying asset, thus making it more attractive to investors.
Gold is entering a bullish super-cycle, analysts say
Longer-term prospects for the precious metal remain upbeat, according to several leading analysts, who are arguing there is evidence that commodities – including Gold – are entering a new bullish super-cycle.
“The last [two] times we saw these valuations for commodities was 1971 and 2000,” tweeted Michaël van de Poppe, Founder of MN Consultancy. “Commodities & #Crypto are extremely undervalued and it's likely that commodities go into a 10-year long bull market.”
Van de Poppe is not the only commentator saying commodities are entering a secular bull market. According to a recent “Flow Show” note from Bank of America Investment Strategist Jared Woodard, a “commodity secular bull market in the 2020s is just getting started as debt, deficits, demographics, reverse-globalization, AI & net-zero policies are all inflationary,” reported Kitco News.
Technical Analysis: Gold stalls in uptrend
Gold’s price has pulled back into the $2,570s, however, the trend is still bullish in the short, medium, and long-term. Given that it is a principle of technical analysis that “the trend is your friend,” the odds favor more upside. If there is a correction, therefore, it is likely to be short-lived before Gold resumes its broader uptrend.
XAU/USD Daily Chart
Gold is not yet overbought according to the Relative Strength Index (RSI), but it is close to overbought. If it enters the zone on a closing basis it will advise traders not to add to their long positions – nevertheless the rally may continue. If the RSI enters overbought and then exits back into neutral it will be a sign of a deeper correction.
In the event of a correction, firm support lies at $2,550, $2,544 (0.382 Fibonacci retracement of the September rally), and $2,530 (former range high).
Economic Indicator
Retail Sales (MoM)
The Retail Sales data, released by the US Census Bureau on a monthly basis, measures the value in total receipts of retail and food stores in the United States. Monthly percent changes reflect the rate of changes in such sales. A stratified random sampling method is used to select approximately 4,800 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms across the country. The data is adjusted for seasonal variations as well as holiday and trading-day differences, but not for price changes. Retail Sales data is widely followed as an indicator of consumer spending, which is a major driver of the US economy. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Last release: Tue Sep 17, 2024 12:30
Frequency: Monthly
Actual: 0.1%
Consensus: -0.2%
Previous: 1%
Source: US Census Bureau
Retail Sales data published by the US Census Bureau is a leading indicator that gives important information about consumer spending, which has a significant impact on the GDP. Although strong sales figures are likely to boost the USD, external factors, such as weather conditions, could distort the data and paint a misleading picture. In addition to the headline data, changes in the Retail Sales Control Group could trigger a market reaction as it is used to prepare the estimates of Personal Consumption Expenditures for most goods.
Author
Joaquin Monfort
FXStreet
Joaquin Monfort is a financial writer and analyst with over 10 years experience writing about financial markets and alt data. He holds a degree in Anthropology from London University and a Diploma in Technical analysis.
