Price of Gold Fundamental Daily Forecast – Weak Retail Sales Data Will Be Supportive

Gold futures are edging lower shortly before the regular session on Monday. The price action is being driven by rising U.S. Treasury yields, a steady U.S. Dollar and generally positive demand for higher risk assets. The market did not follow-through to the upside following Friday’s strong rebound rally. This suggests the move may have been fueled by short-covering and buy stops rather than aggressive speculative buying.

At 09:15 GMT, April Comex gold is trading $1296.70, down $2.60 or -0.20%.

Today’s price action indicates that investors may be waiting for the release of today’s U.S. retail sales report before making their next move. Friday’s rally was fueled by a mixed U.S. employment report so a weaker-than-expected retail sales report will likely lead to a continuation of this chart pattern.

The major reports on Monday are in the United States. At 12:30 GMT, investors will get the opportunity to react to the latest data on Core Retail Sales and Retail Sales. At 14:00 GMT, the U.S. will release a report on Business Inventories.

January retail sales start the busy week. The report was delayed due to the partial government shutdown earlier in the year. “Underlying retail sales probably rebounded in January, but real consumption growth is still likely to slow in the first quarter,” Capital Economics wrote in a note on Friday. Economists are expecting January’s Core Retail Sales to have risen 0.4%, up from the previously reported minus 1.8%. Retail Sales are expected to come in flat, up from the minus 1.2% reported in December.

Weaker-than-expected retail sales data is likely to drive gold higher since it will add to concerns about a slowing domestic economy.

Although the strong U.S. Dollar is helping to cap gains in gold, speculative buyers may be able to overcome this issue due to the possible economic shock of the UK leaving the European Union after March 29. Parliament is expected to reject Prime Minister Theresa May’s deal in a vote on Tuesday.

In other news, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday that speculators slashed their net long position in gold in the week to March 5, to its lowest in over a month. Needless to say, we already knew this given the steep drop in prices that week.

Look for the tone to be set by the U.S. retail sales report. A strong report will likely offset last Friday’s mixed jobs data, which should put renewed pressure on gold prices. However, a weaker report will raise a red flag about the strength of the U.S. economy and this could be bullish for gold.