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David Becker

Gold prices moved lower, breaking through trend line support and poised to test lower levels. The dollar moved higher, weighing on the yellow metal despite a slight pullback in long-term US treasury yields. A stronger than expected US PPI report in conjunction with a robust January retail sales report helped buoy the greenback. With momentum turning negative, the chance of a breakdown has increased.

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Technical analysis

Gold prices moved lower breaking down below trend line support near $1,789 and poised to push through the November lows at 1,764. A close below this level would lead to a test of the . A break of this level would lead to a test of the June lows at 1,667.  Resistance is seen near the 10-day moving average at 1,815. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line the 9-day moving average of the MACD line).

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Retail Sales Rose More than Expected

US retail sales rose 5.3% in January, according to the US Commerce Department. Expectations were for retail sales to rise by 1.2%. Excluding autos, sales rose 5.9%, also far ahead of the 1% estimate. Electronics and appliances saw the biggest increase, up 14.7% for the month, while furniture and home furnishing stores were up 12% and online spending at nonstore retailers jumped 11%. Online shopping is the biggest gainer since January 2020, up 28.7%, while building materials rose 19% and sporting goods increased 22.5%.

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