Gold (XAU/USD) prices dipped on Tuesday, retracing earlier gains, after US Retail Sales data for June exceeded expectations. This suggests a resilient US economy and potential for persistent inflation, which could moderate the Federal Reserve’s (Fed) inclination towards aggressive interest rate cuts.
Retail Sales Data Tempers Rate Cut Optimism
The unexpected uptick in retail sales, particularly the 0.9% increase in the control group (a key indicator of consumer spending), has tempered the market’s enthusiasm for Fed rate cuts. While Fed Chair Jerome Powell had previously hinted at easing monetary policy, the robust consumer spending figures may prompt a reassessment of the Fed’s trajectory.
The CME FedWatch tool, which gauges market expectations for Fed policy, still indicates a 100% probability of a 0.25% rate cut in September. However, the extent of future easing may be reevaluated as the Fed balances inflation concerns with economic growth.
Gold Technical Analysis: Sideways Consolidation Persists
Gold’s price action remains within a sideways consolidation pattern, with the precious metal trading between $2,280 and its May 20th all-time high of $2,451. Despite the recent pullback, the long-term outlook remains bullish, with potential for a breakout above the $2,451 resistance level.
Key Points:
- Gold prices retreat as strong US Retail Sales data dampens rate cut hopes.
- Fed’s policy outlook becomes more uncertain amid conflicting economic signals.
- Gold remains in sideways consolidation, but bullish breakout potential remains.
- Key levels to watch: $2,280 support, $2,451 resistance, and potential target of $2,555.
