Gold Price Prediction – Gold is Buoyed by Weak Retail Sales

Gold prices rebounded on Thursday as the dollar edged lower versus the Euro, following a weaker than expected US retail sales report.  The soft US data was offset by a flat reading on German GDP allowing Europe’s largest economy to barely avoid a recession. Germany posted a 0.2% increase in GDP in the Q3. The soft US data also weighed on riskier assets, following softer than expected inflation data. So economic data across the globe makes all currencies unattractive, allowing gold to gain wider attention.

Technical Analysis

Gold prices moved sideways on Thursday, rebounding slightly and continuing to form a bull flag pattern. Prices are holding just above short-term support near the 5-day moving average at 1,309. Additional support is seen near the 20-day moving average at 1,303. Resistance is seen near the January highs at 1,325. A close below the 20-day moving average could be the impetus to drive prices back toward the 2018 lows near 1,180. Despite the slight downward trend as prices consolidate momentum appears to be negative. The fast stochastic generated a crossover sell signal and continue to move lower which reflects accelerating negative momentum. The MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices.

Retail Sales Came in Worse than Expected

US Retail Sales came in weaker than expected sliding dropped 1.2% in December, according to the Commerce Department. Expectations were for a flat reading. The core retail sales which excludes automobiles, gasoline, building materials and food services, dropped 1.7% last month after an upwardly revised 1.0% surge in November. The softer than expected numbers were not lost on the Fed.

Federal Reserve Governor Lael Brainard, in an interview on CNBC said she’s growing more concerned about economic growth. The Fed increase interest rates at its December meeting but somewhat reversed course during its late January meeting. This now makes sense given the weaker than expected retail sales.