US Dollar weighs on gold. Will US retailer change course?

Gold Fundamental Forecast: Bearish

  • Gold prices fell last week due to a broad risk-off market movement
  • Data for U.S. retail sales will show the economic chart this week
  • XAU direction may depend on how the dollar responds to this data

Gold prices fell further last week as traders weighed the chances of an economic recession amid a growing hawkish Federal Reserve sentiment. It was amplified by several inflationary pressures from the United States. The consumer price index for April (CPI) crossed the threads of 8.3% y / y, beating analysts’ expectations of 8.1% y / y. The producer price index (PPI) for the same period revealed that factory prices remain highly elevated at 11.0% y / y.

This set of inflation data helped push the U.S. dollar up against most of its major peers. A stronger dollar typically works against gold prices. The euro-dove, which drives much of its strength, probably because of Finland’s announcement that it intends to pursue NATO membership. It triggered a strong reaction from Russia, in which the crisis-stricken country promised to retaliate, strengthening the risk-off tone that has covered the eurozone.

Traders will see several high-profile data prints in the coming week that may affect XAU prices. The April print for U.S. retail sales may have the biggest impact on the broader market sentiment. Analysts see retail sales growing at a 0.7% m / m cut for April, according to a Bloomberg survey. A stronger-than-expected figure could cool some fears of a looming decline in economic activity. It would probably help cool the US dollar and perhaps allow gold to rise by removing some risk aversion from the markets, as the dollar has largely served as a paradise for traders.

Weekly chart for gold versus US dollar

gold vs dollars

Diagram created with TradingView

— Written by Thomas Westwater, analyst for Technewscity

To contact Thomas use the comment field below or @FxWestwater on Twitter