Gold Prices Slip as Treasury Yields Rise to Fresh 23-Month Highs

Gold prices edged lower for the second consecutive trading session edging back toward the breakout support level. Despite the pullback, gold prices were higher by 1.1% for the week. The dollar rebounded on Friday, putting downward pressure on the yellow metal. U.S. Treasury yields rallied despite mixed economic data. The 2-year Treasury yields hit a pre-pandemic high while the interest rate curve flattened. Retail sales were softer than expected as online spending declined.

Technical Analysis

Gold prices eased slightly, edging back toward support. Prices retreated to a downward sloping trend line that comes in near $1,821. Additional support is seen near the 200-day moving average at 1,800.   Resistance is seen near the January highs at 1,831. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index has generated a crossover buy signal. This situation 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).

Retail Sales Fall More than Expected

The Commerce Department on Friday reported that U.S. Retail sales fell much more than expected in December. To close out the year, the advance monthly sales report showed a decline of 1.9%, considerably worse than expectations for a 0.1% drop. Excluding autos, sales fell 2.3%, which also fell well short of expectations for a 0.3% rise. In addition to the weak December numbers, the November gain was revised down to 0.2% from the initially reported 0.3% increase. Online spending took the biggest hit as a share of overall spending, with nonstore retailers reporting a plunge of 8.7% for the month.