Retail Sales Plunge, Gold Rebounds
Gold prices strengthened again during Friday's trading (August 14) after previously dropping to a weekly low of around US$4,311 per troy ounce. The XAU/USD pair subsequently rebounded to the US$4,372 level, supported by a weakening US dollar and diminishing expectations of a near-term Federal Reserve interest rate hike.
Gold's gains were further bolstered after US retail sales for July fell by 0.6% month-on-month—far weaker than the projected 0.1% rise and a reversal from the 0.2% growth seen in June. The data indicates that US consumer spending momentum is beginning to lose steam.
Weak retail sales data rounded out a series of softening US economic indicators throughout the week. CPI and PPI figures showed inflationary pressures easing, while weaker-than-expected July Nonfarm Payrolls—combined with downward revisions to data from the previous two months—signaled that labor market conditions are not as robust as before.
This combination of data weighed on short-term Treasury yields and kept the Dollar Index below the 100 level. Markets now estimate a roughly 70% probability that the Fed will hold interest rates steady at its September meeting, thereby supporting gold, a non-yielding asset.
However, gold's upside potential remains capped by lingering inflation risks. Oil prices remain elevated due to uncertainty regarding the reopening of the Strait of Hormuz, and long-term Treasury yields remain high. Consequently, the market has not entirely ruled out the possibility of a Fed rate hike in the subsequent period.
Newsmaker Analysis: The rebound from US$4,311 demonstrates that buyers remain active in capitalizing on gold's price correction. As long as the dollar remains weak and expectations for a Fed rate hike continue to decline, gold has the potential to retest the US$4,400 level and even the two-month high of US$4,449. Nevertheless, that area remains a strong resistance zone, meaning profit-taking could re-emerge if buying momentum begins to fade. (arl)
Source: Newsmaker.id
