- Gold price falls after the release of US Retail Sales data for August.
- Traders now await the key Fed policy decision, with probabilities favoring a larger 0.50% cut to interest rates.
- Such a move would boost the attractiveness of Gold.
- Analysts call a 10-year secular bull trend starting for commodities, including Gold
Gold (XAU/USD) pulls back to the $2,570s
after the publication of US Retail Sales data for August on Tuesday
The last major US macroeconomic data
release before the Federal Reserve (Fed) makes its decision on Wednesday. In
comparison to the revised-up 1.1% increase in July, US retail sales increased
by 0.1% month-over-month in August. The data from the US Census Bureau
indicated that this exceeded the consensus expectation of a 0.2% decline.
The United States' retail sales ex-autos, on the other hand, increased by 0.1%
following a 0.4% increase in July. This was less than the anticipated increase
of 0.2%.
The data slightly reduced the probabilities of the Federal Reserve (Fed)
cutting interest rates by a larger 0.50% at its September meeting, weighing
marginally on Gold. According to the CME FedWatch tool, the probabilities were
67% before the release, but they had been reduced to 65% after the data was
released.
Gold experiences an increase in
value amid speculation that the Federal Reserve will implement an additional
reduction. Gold shot to an all-time-high (ATH) of $2,589 on Monday after market
bets that the Fed will make a double-dose 0.50% cut to interest rates at its
meeting on Wednesday rose sharply, according to market-based gauges.
The likelihood that the Federal
Reserve will reduce interest rates is advantageous for Gold, as it reduces the
opportunity cost of retaining the yellow metal, a non-interest-paying asset,
thereby increasing its appeal to investors.
Analysts assert that gold is
undergoing a bullish supercycle.
According to numerous prominent analysts, the precious metal's longer-term
prospects are optimistic. They contend that there is evidence that commodities,
including Gold, are entering a new favourable super-cycle.
Michaël van de Poppe, the founder of
MN Consultancy, tweeted, "The last [two] times we saw these valuations for
commodities were in 1971 and 2000." "Commodities and #Crypto are
significantly undervalued, and it is probable that commodities will enter a
10-year bull market."
Van de Poppe is not the sole observer who asserts that commodities are entering
a secular bull market. According to a recent “Flow Show” note from Bank of
America Investment Strategist Jared Woodard, a “commodity secular bull market
in the 2020s is just getting started as debt, deficits, demographics,
reverse-globalization, AI & net-zero policies are all inflationary,”
reported Kitco News.
Technical Evaluation: Gold stalls in uptrend
Gold’s price has pulled back into
the $2,570s, however, the trend is still bullish in the short, medium, and
long-term. Given that it is a principle of technical analysis that “the trend
is your friend,” the odds favor more upside. If there is a correction,
therefore, it is likely to be short-lived before Gold resumes its broader
uptrend.
XAU/USD Daily Chart
Gold is not yet overbought according
to the Relative Strength Index (RSI), but it is close to overbought. If it
enters the zone on a closing basis it will advise traders not to add to their
long positions – nevertheless the rally may continue. If the RSI enters
overbought and then exits back into neutral it will be a sign of a deeper
correction.
In the event of a correction, firm
support lies at $2,550, $2,544 (0.382 Fibonacci retracement of the September
rally), and $2,530 (former range high).
#Gold #FOMC #Interestratecut #Fedrate
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