Market Overview: The gold market is seeing some slight selling pressure in early trade today following an upbeat retail sales report. While investors digest this and PPI, more data is awaited later this morning. While things can and do change quickly, early indications are pointing to a relatively quiet session to end the trading week. While gold lost ground this week, the market still appears poised for another move to the upside.
Key Data Points: Retail sales was released earlier this morning as is likely the most important piece of data for the trading week. Monthovermonth retail sales rose 1.3 percent while consensus estimates were looking for a gain of just .09 percent. Gains were spread throughout the report, with auto sales leading the charge with a rise of 3.2 percent. While yearoveryear sales rose, total sales remain on the softer side of the ledger.
PPI came in softer than expected at a reading of .2 percent while consensus estimates were looking for a rise of .3 percent. Overall , inflation remains very subdued, even in spite of the recent rise in energy prices and dollar weakness.
Consumer Sentiment and Business Inventories are scheduled for release at 10 am EST.
Outside Markets: The dollar index has been a driving factor for gold and silver in recent months as the greenback has been in a steady downtrend. After breaking below key prior support in recent weeks, the dollar has come roaring back in what was clearly a false breakdown. While higher today on the upbeat retail sales data, the dollar does remain vulnerable to further downside. Any commentary from the Fed or further changes in interest rate expectations could potentially make or break the dollar right now, and gold could see even stronger buying interest if the dollar starts a fresh leg lower.
Crude oil is slightly lower today. Oil has recovered some significant ground in recent months, although appears to be stalling out in the mid $40s.
Stocks are slightly higher today as recent back and forth action continues. Despite stocks backing off from recent highs, overall risk appetite has remained relatively strong. The broad market is looking vulnerable, however, and a large scale selloff could potentially drive more capital into precious metals as investors seek out alternatives. In fact, equity and dollar weakness could be the recipe for a significant rally from current levels in gold.
The Big Picture: Despite gold’s failure to hold above the $1300 level in recent trade, we believe a test of this level will be seen again in the coming sessions. The bulls appear to be in firm technical control and dips in gold are apparently being scooped up by investors. Gold may, however, see some limited upside until more clarity is seen regarding the pace and timing of further interest rates.
