Gold consolidates as US Retail Sales comes into spotlight

Most recent article: Gold retreats on risk appetite despite survey showing central bank demand to endure

Gold price edges higher on Tuesday, albeit the uptick lacks any follow-through buying.
Signs of easing inflation keep a September Fed rate cut on the table and lend support.
A modest USD strength caps the upside for the XAU/USD ahead of the US Retail Sales.

Gold price (XAU/USD) attracts some dip-buying during the European session on Tuesday and reverses a part of the previous day's modest losses. The incoming US macro data suggested that inflationary pressures are subsiding, keeping hopes alive for the first rate cut by the Federal Reserve (Fed) in September and lending some support to the non-yielding yellow metal. The commodity, however, lacks bullish conviction and remains confined in over a one-week-old range below the 50-day Simple Moving Average (SMA), warranting some caution for bullish traders.

The Fed last week adopted a more hawkish stance and policymakers continue to argue in favor of only one interest rate cut this year. The hawkish outlook remains supportive of elevated US Treasury bond yields, which helps revive the US Dollar (USD) demand and should keep a lid on any meaningful appreciating move for the Gold price. Moreover, a generally positive risk tone might contribute to capping the safe-haven precious metal. Hence, strong follow-through buying is needed to confirm that the recent pullback from the all-time peak has run its course.

Daily Digest Market Movers: Gold price bulls struggle to capitalize on modest intraday uptick amid Fed rate cut uncertainty

The emergence of some US Dollar dip-buying acts as a headwind for the Gold price on Tuesday, though any meaningful slide seems elusive in the wake of bets for two rate cuts by the Federal Reserve in 2024.
The Fed projected only one interest rate cut this year as compared to three projected in March, allowing the US bond yields to recover a part of last week's downfall and assisting the USD to regain positive traction.
Moreover, Philadelphia Fed President Patrick Harker said on Monday that keeping rates where they are for a bit longer will get inflation down and mitigate upside risks, undermining the non-yielding yellow metal.
Meanwhile, data released on Friday showed that US import prices fell for the first time in five months in May, which, along with weaker US consumer and producer prices, suggested that inflation in the US is subsiding.
This keeps hopes alive for the first rate cut by the Fed in September and another in December, warranting some caution before positioning for the resumption of the commodity's recent pullback from the all-time peak.
Investors now look forward to Tuesday's US economic docket – featuring the release of Retail Sales and Industrial Production data – for short-term trading opportunities later during the early North American session.
Apart from this, speeches by a slew of influential FOMC members will play a key role in driving the USD demand, which, along with the broader risk sentiment, should provide some impetus to the precious metal.

Technical Analysis: Gold price remains below 20-day EMA

From a technical perspective, the $2,333-2,336 region is likely to act as an immediate hurdle ahead of the 50-day SMA support, currently pegged near the $2,344-2,345 region. This is followed by the $2,360-2,362 supply zone, which, if cleared decisively, might prompt some short-covering rally and lift the Gold price to the $2,387-2,388 intermediate hurdle en route to the $2,400 mark. A sustained strength beyond the latter will suggest that the recent corrective slide from the all-time top set in May has run its course and should allow the XAU/USD to retest the $2,450 region.

On the flip side, bearish traders need to wait for a sustained break and acceptance below the $2,300 mark before placing fresh bets around the Gold price. Some follow-through selling below the $2,285 horizontal support will confirm a breakdown and pave the way for deeper losses. The commodity might then accelerate the fall towards the next relevant support near the $2,254-2,253 region. The downward trajectory could extend further and eventually drag the XAU/USD towards the $2,225-2,220 support en route to the $2,200 round-figure mark.

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.

Why it matters to traders?

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.

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