XAU/USD – Gold Shoots Higher as US CPI, Retail Sales Disappoint

Gold has posted strong gains Friday’s North American session. Currently spot gold is trading at $1229.80 per ounce and is up 1.03% on the day. On the release front, consumer data was soft, as CPI and retail sales missed their estimates. Later in the day, the US releases UoM Consumer Sentiment, which is expected to improve to 95.1 points.

With the US economy slowing gears in 2017, Friday’s inflation and consumer spending numbers marked an important report card. The results were not positive, as CPI and retail sales reports were softer than expected. CPI posted a flat reading of 0.0%, shy of the forecast of 0.1%. There was no relief from retail sales, which declined 0.2%, compared to an estimate of +0.2%. Retail sales have now declined for a second straight month, renewing concerns that second quarter growth could be soft, which would be bad news for the US dollar.

All eyes were on Janet Yellen this week, as she testified before congressional and senate committees about the Federal Reserve’s monetary policy report, which was released last week. Yellen’s comments didn’t contain any gold nuggets, and the markets shrugged off her testimony. Yellen reiterated that the Fed planned to raise rates “gradually”, and added that the Fed would begin trimming its balance sheet before the end of the year. The Fed chair didn’t provide any timelines, but the most likely timelines are September for a balance sheet reduction, with a rate hike to follow in December. However, despite Yellen’s assurances, the markets remain lukewarm about a rate hike before the end of the year. Investors are concerned that the US economy has slowed down in 2017 and may not need another rate hike. In her testimony before a congressional committee, Yellen repeated that she believes the factors weighing on inflation are temporary. However, she acknowledged that with inflation well below the Fed’s target of 2%, “there could be more going on there”. Early in the year, the Fed all but signed on the dotted line that it would raise rates three times in 2017, but a third rate hike has become a serious question mark, with the odds of a December hike continuing to dip. According to the CME Group, the current odds for a December increase are just 43%.

XAU/USD Fundamentals

Friday (July 14)

• 8:30 US CPI. Estimate 0.1%. Actual 0.0%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Core Retail Sales. Estimate +0.2%. Actual -0.2%
• 8:30 US Retail Sales. Estimate +0.1%. Actual -0.2%
• 9:15 US Capacity Utilization Rate. Estimate 76.7%
• 9:15 US Industrial Production. Estimate 0.3%
• 9:30 US FOMC Robert Kaplan Speaks
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.1
• 10:00 US Business Inventories. Estimate 0.3%
• 10:00 US Preliminary UoM Inflation Expectations

*All release times are EDT

*Key events are in bold

XAU/USD for Friday, July 14, 2017

XAU/USD July 14 at 8:40 EST

Open: 1217.50 High: 1230.61 Low: 1204.89 Close: 1229.80

XAU/USD Technical

• XAU/USD showed little movement in the Asian session but has posted gains in European trade
• 1199 is providing support
• 1232 is under pressure in resistance. This line could break during the North American session
• Current range: 1199 to 1232

Further levels in both directions:

• Below: 1199, 1170 and 1146
• Above: 1232, 1260, 1285 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Friday session. Currently, long positions have a majority (75%). This is indicative of XAU/USD continuing to move higher.

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