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David Becker
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Gold prices dropped sharply on Friday in the wake of the stronger than expected U.S. Retail Sales report. The dollar edged higher but U.S. yields were only slightly buoyed. For the week the Yellow metal was nearly unchanged up slightly.  The U.S. Commerce Department reported on Friday that U.S. Retail sales increased by 0.6% month over month. This compares to expectations that headline retail sales in the U.S. would fall by 0.3% month over month.

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Technical analysis

Gold prices were dropped sharply on Friday and remain rangebound. Support is seen near the 20-day moving average at 1,792.  Resistance is seen near the 50-day moving average at 1,837. Short-term momentum has flip-flopped, turning negative as the fast stochastic generated a crossover sell signal. The fast stochastic has moved from a reading of 91, above the overbought trigger level of 80, to 73, which reflects accelerating negative momentum. Medium-term momentum has shifted positively as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

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U.S. Retail Sales Rise More than Expected

Retail sales rose 0.6% last month. The May reading was revised lower showing retail sales fell 1.7% instead of declining 1.3% as previously reported. Expectations were for retail sales to decline by 0.3%. Sales surged 18.0% year over year but the baseline is altered by sales during the pandemic. Spending is now rotating back to services like travel and entertainment, with at least 160 million Americans fully immunized against COVID-19. Certain services like restaurant and bar sales are counted while travel and hotel accommodations are not picked up by the retail sales numbers.

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