Strong retail sales and dollar strength are pushing gold down in trading today
Gold futures traded at a high of $ 1,879.50 overseas last night, but then fell sharply from those highs when the US Census Bureau announced the advanced estimate of retail sales and food services for October 2021. At the same time, the Federal Reserve released its industrial production data for October. . Both reports pointed to robust production and spending which was cited as the main explanation for the gold selling so rapidly.
Retail sales in the United States increased last month, beating estimates. Economists polled by the Wall Street Journal predicted that the report would show an increase in retail sales of 1.5%.
Figures released by the US Census Bureau indicated that monthly advance sales reached 1.7% year-on-year, totaling $ 638.2 billion. This was just over double the growth in retail trade and food services in September, which reached $ 627.5 billion, an increase of 0.8%.
The Retail and Foodservices report began with the following comments: “The anticipated estimates of US retail and foodservice sales for October 2021, adjusted for seasonal variations and differences. between holidays and working days, but not for price changes, were $ 638.2 billion, an increase of 1.7 percent (± 0.5 percent) from the previous month and 16 , 3 percent (± 0.9 percent) above October 2020. ”
The Federal Reserve announced that “industrial production rose 1.6% in October after falling 1.3% in September”. However, the Fed said about half of the increase in industrial production reflected a recovery from the effects of Hurricane Ida.
One caveat about the numbers released today is that spiraling inflationary pressures have dramatically increased the amount of spending, which has inflated the retail sales numbers that were reported today.
These reports and the strength of the dollar were the forces that drove gold down today at 5:00 p.m. EST, the basis for gold futures, the most active December contract is pegged at $ 1,852 after factoring in today’s drop of $ 14.60, or -0.78%. About 2/3 of today’s lower prices are attributed to the strength of the dollar. The US dollar index gained 52 points, or 0.55%, and is currently pegged at 95.925. Because gold is a trading partner with an absolute negative correlation. When we subtract the decline in gold due to the strength of the dollar, a small portion of 0.24% comes from the fact that market participants are active sellers.
We have created a Fibonacci retracement dataset that begins at this rally low that occurred on Wednesday, November 3, 2021, when gold traded at a low of $ 1758. The dataset starts Nov 16 at an intraday high of $ 1,879.50. Gold traded at the 23% Fibonacci retracement level, which is pegged at $ 1,851.50. A shallow correction can easily give up 23% before reverting to the main direction of the current trend, which in this case is upward. Below that price is the 38% Fibonacci retracement which occurs at $ 1,833.30. I think a breakout of gold below this price is highly unlikely. Market participants will see the updated PCE Core Inflation Index for October when it is released on November 24, a day before the Thanksgiving holiday in the United States. This should be the next report that could heavily influence gold prices.
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Wishing you, as always, good transactions,
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