On Wednesday (February 15th), the United States announced “terrorist data” – retail sales in January “exploded” – greatly exceeded expectations, spot gold continued to be under pressure and fell 1.01% throughout the day, reaching the lowest intraday level of 1829.80. Dropped nearly $30.
The monthly rate of retail sales in January released by the United States on Wednesday recorded 3%, the largest increase since March 2021, well above the expected 1.80%, and the previous value was -1.10%. After the release of the data, the U.S. dollar index rose by 20 points in the short term, approaching the 104 mark. U.S. 2-5 year Treasury yields hit fresh 2023 highs. The inversion between the US 2-year and 10-year Treasury yields further expanded to 89.8 basis points. The data highlighted a strong start for U.S. consumption in 2023, rebounding from a slowdown in spending late last year. U.S. retail sales rose by the most in nearly two years in January, pointing to strong consumer demand that could bolster the Federal Reserve’s resolve to keep raising interest rates amid persistent inflation. In fact, thanks to a resilient U.S. labor market, historically low unemployment and strong wage growth, many Americans have been able to keep buying goods and services despite rising borrowing costs and persistently high inflation. And the unexpectedly strong non-farm payrolls report for January, with wage growth remaining strong, bodes well for the near-term outlook for consumer spending. Institutions believe that the latest data once again show that the U.S. economy may be overheated and inflation will be difficult to drop in the short term, which is why U.S. Treasury yields have risen. The resilience of the U.S. economy underscores the challenge facing the Fed. Demand is likely to remain high until there are signs of weakness in the labor market, which means the Fed will need to keep raising rates or keep them restrictively high for longer. As Fed officials have repeatedly said, the Fed will be guided by data in its decision to raise interest rates. And recent economic indicators suggest that the U.S. economy is still overheating, not in line with the Fed’s expectations. In other words, it means that the Fed’s interest rate hike may continue for a period of time. From a macro perspective, gold will face an unfavorable situation.
On the technical level, the daily chart shows that the price of gold has fallen below the short-term important support of 1850, and the door for further declines has been opened. Although the current 38.2% Fibonacci retracement level below 1828 may provide weak support, it will eventually fall below and go further. The downside to 1800 and the 50% Fibonacci retracement level at 1788 is very risky. And if there is a short-term rebound, 1850 has turned into resistance, which is expected to limit the room for rebound. But if the rise breaks through 1850, you should pay attention to the risk of further strength pointing to potential resistance such as 1860 and 1870.
Wang Gang, Guangdong Branch, Bank of China
Opinions are personal and do not represent those of the organization