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US Inflation Due

Gold prices are starting the week on a softer footing as traders brace for crucial US economic readings this week with the latest inflation and retail sales data both due on Wednesday. On the back of the recent dip we’ve seen in both jobs and growth, traders are highly sensitive to the risk that recent upward US economic momentum might be fizzling out. The Fed has taken a more hawkish stance recently, in line with the continued rise in inflation and the strength we’ve seen in the jobs market. However, with jobs growth finally cooling, a drop in inflation this week should bring near-term Fed easing back into focus, boosting expectations of a September cut. In this scenario, USD is likely to trade lower through the end of the week, allowing room for gold prices to break higher.
 

Retail Sales in Focus

Alongside inflation data, we’ll also get the latest look at retail sales. Weakening household spending has emerged as a worrying trend this year. With advanced Q1 GDP seen falling well short of expectations, traders will be carefully watching Wednesday’s reading. If the data shows fresh weakening in retail spending, this will no doubt be taken as a worrying sign of further slowing in the economy, boosting rate-cut expectations and pressuring USD. For gold bulls, therefore, the best outcome on Wednesday would be weak readings in both sets of data to help drive down USD through the end of the week.
 

Technical Views

Gold

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The rally in gold futures off the 2275.43 level has stalled for now into a test of bull channel highs and the 2364.93 resistance. While support holds, focus remains on a continuation higher and further development of the channel. Below 2275.43, however, 221.39 will be the next support to watch ahead of the channel lows. 

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