Gold Price Prediction – Prices Drop on Solid Retail Sales

Gold prices moved lower on Tuesday as the dollar gained traction and US yields moved higher. The rise in the 10-year yield put the yield curve back into positive territory, which means that traders believe that a recession is less likely. Higher yields buoyed the greenback paving the way for lower gold prices.

Technical Analysis

Gold prices moved lower but remains in a consolidative bull flag pattern. Support is seen near the 10-day moving average at 1,408. A break below this level would lead to a test of the 50-day moving average near 1,345. Resistance is seen near the July highs at 1,437. Short term momentum is neutral to positive as the trajectory has turned higher after a crossover buy signal was created. The current reading of 55, is in the middle of the neutral range and reflects consolidation.

The Yield Curve is No Longer Inverted

The 3-month to 10-year US curve is back to positive territory, after spending months inverted.  Separately, the Atlanta Fed GDPNow is tracking Q2 growth at 1.4%, up from 1.3% previously.  Elsewhere, NY Fed Nowcast has Q2 growth at 1.5%, steady from last week.  Its Q3 reading rose to 1.75% SAAR from 1.74% previously.

Retail Sales Grew More than Expected

US retail sales increased more than expected in June. The Commerce Department reported that US retail sales rose 0.4% last month driven by gains in motor vehicles. Data for May was revised slightly down to show retail sales increasing 0.4%, instead of increasing 0.5% as previously reported. Expectations had forecast retail sales edging up 0.1% in June. Compared to June last year, retail sales advanced 3.4%. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.7% last month after an upwardly revised 0.6% increase in May. Core retail sales, previously reported to have increased 0.4% in May.