Daily digest market movers: Gold price faces pressure after robust US Retail Sales data
- Gold price slides to $2,370 while attempting to recapture new all-time highs around $2,430. Sheer strength in the US Dollar and US bond yields have been acting as a barricade to Gold. The appeal of the US Dollar strengthens and bond yields rise further as robust Retail Sales data for March has deepened the uncertainty about when the Federal Reserve will start lowering its key interest rates.
- The US Retail Sales data for March, released on Monday, indicated a strong demand despite US interest rates remaining higher. The monthly Retail Sales increased by a sharp 0.7%, more than the 0.3% rise expected. Retail Sales in February were revised higher to 0.9% from 0.6%. Retail Sales data is one of the leading indicators of consumer spending, which accounts for more than two-thirds of the US economy. Higher Retail Sales suggest demand from households remains strong, a factor fueling inflation.
- Strong Retail Sales data, combined with robust labor demand and a higher-than-expected Consumer Price Index (CPI) data, has forced traders to unwind expectations for early Fed rate cuts. The CME FedWatch tool shows markets are pricing in that interest rates will remain unchanged in the range of 5.25%- 5.50% in the June and July meetings. The Fed is now anticipated to pivot to rate cuts in September.
- Meanwhile, fears over Middle East tensions spreading beyond Gaza keep the safe-haven demand strong. Investors worry about a further escalation in the Israel-Iran tensions after Israel’s military Chief of Staff Herzi Halev said they would respond to Iran’s attack on their territory, in which hundreds of drones and missiles were fired, AlJazeera reports. US President Joe Biden said it won’t support the counterattack from Israel.
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