Gold price slips as US Retail Sales beat expectations

• Gold price falls as expectations of a Fed rate cut in September decline, supporting yields and the US Dollar.
• US Retail Sales data beats estimates, a sign that consumer spending has improved.
• XAU/USD falls into a narrow range, with a breakout above $3,371 or a drop below $3,292 likely to define the next directional move.

Gold (XAU/USD) is experiencing a pullback in the European session on Thursday as traders digest US Retail Sales data and await further comments from Federal Reserve (Fed) officials. The yellow metal trades near $3,315 at the time of writing, losing almost 1% in the day.

With the timing of when the Federal Reserve will cut interest rates still uncertain, several members of the central bank are scheduled to speak throughout the day. Comments from Governor Adriana Kugler, San Francisco President Mary Daly, Governor Lisa Cook, and Governor Christopher Waller will be monitored closely.

If investors anticipate that rates will remain higher for longer, there would be increased demand for US Yields, which does not bode well for non-yielding assets such as Gold.

Additionally, bullion serves as a safe haven during times of economic uncertainty. This brings the US economic calendar into focus. On Thursday, US Retail Sales data for June, beat estimates, rising 0.6% in June, above the 0.1% expected by economists. This marks a positive turn for consumer spending trends, which contracted by 0.9% in May. Jobless Claims also came in better than expected, further supporting the US Dollar and weighing on Gold.

Daily digest market movers: Gold awaits key Fed speak as uncertainty over the timing of rate cuts lingers

• The Retail Sales Control Group, which excludes volatile components such as autos, gas, and building materials, provides a clearer picture of core consumer spending. It is considered a more accurate gauge of underlying retail activity and overall consumer demand. The increase of 0.5% in June after a 0.2% rise in May signals stronger consumer spending, which typically supports economic growth.
• The minutes from the June Federal Open Market Committee (FOMC) Meeting showed that the majority of Fed members remain hesitant to pivot away from their restrictive stance without clearer signs of disinflation. As the labour market has shown signs of resilience, the implications of tariffs on inflation remain a key concern. This hawkish tone from members has weighed on Gold, which typically moves inversely to both interest rates and the US Dollar.
• US Consumer Price Index (CPI) for June, released on Tuesday, reflected persistent inflation at the consumer level, particularly with core inflation rising to 2.9% YoY from 2.8% in May, shifting further away from the Fed's objective target of 2%. This suggests that price pressures remain elevated, especially in services and essential areas, which the Fed closely monitors.
• In contrast, US Producer Price Index (PPI) data on Wednesday showed no monthly growth and a slowdown in yearly terms. This suggests that upstream input costs are easing, which may eventually be reflected in lower consumer inflation, although not immediately.
• According to the CME FedWatch Tool, the probability of an interest rate cut at the September meeting currently stands at 52.4%, while the prospects of the Fed leaving rates steady in the 4.25%-4.50% range at the same meeting rises to 46.3%.

Technical analysis: Gold remains rangebound between $3,300 and $3,400

Gold price has dipped below the 50-day Simple Moving Average (SMA) at $3,323, with the 20-day SMA providing resistance at $3,331.

As price action remains within the confines of a symmetrical triangle pattern on the daily time frame, the metal remains range-bound.

The $3,300 psychological level continues to provide support, with the 38.2% Fibonacci retracement level of the April low-high move just below around $3,292. A deeper pullback could open the door for an extended downward move to the 50% Fibonacci retracement near $3,228 and toward the next psychological level of $3,200.

Gold (XAU/USD) daily chart

For the uptrend to gain traction, a break of the 20-day SMA and above triangle resistance at $3,360 is required. The next resistance level rests at the 23.6% Fibonacci retracement at $3,372, followed by Monday's high of $3,375 and the $3,400 psychological level into focus.

The Relative Strength Index (RSI) at 48 reflects a lack of decisive momentum.