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Gold May Fall as US Retail Sales Data Boosts QE Taper Bets

Gold May Fall as US Retail Sales Data Boosts QE Taper Bets

Ilya Spivak, Head Strategist, APAC

Gold prices may decline amid ebbing demand for an alternative to paper currency as US Retail Sales data boosts bets on a reduction of Fed stimulus efforts.

Talking Points

  • Markets Look to US Retail Sales Data to Guide Fed QE “Taper” Outlook
  • Gold, Crude Oil May Decline as Stimulus Reduction Bets Swell Once Again

All eyes are on the US Retail Sales report to start the trading week, with the outcome likely to be interpreted in terms of its implications for the Fed policy outlook. Markets seem to be coming around to the idea that last week’s much-discussed Ben Bernanke commentary marked clarification of the Fed’s policy trajectory rather than an about-face on the intention to taper asset purchases. This is likely to make for highly data-sensitive price action once again as traders resume refining bets on the timing and size of the first reduction in QE.

Receipts are expected to rise 0.8 percent, marking the largest increase in four months. The supportive outcome may be interpreted to suggest Ben Bernanke and company are on track to deliver the first cutback in stimulus at the September FOMC meeting (in line with what is emerging as the consensus view). Such an outcome is likely to weigh on gold and silver amid ebbing anti-fiat demand. It may likewise sour risk appetite, sending cycle-sensitive commodities including copper and crude oil downward. Needless to say, a downside surprise can be expected to carry the inverse implications.

Crude Oil Technical Analysis (WTI)- Prices put in a bearish Dark Cloud Cover candlestick pattern, hinting a move lower is ahead. Near-term support is at 103.93, the 23.6% Fibonacci retracement, with a break beneath that targeting a rising trend line at 102.18 and the 50% level at 100.05. Near-term resistance is at 107.41, the July 11 high.

Commodities_Gold_May_Fall_as_US_Retail_Sales_Boost_QE_Taper_Bets_body_Picture_3.png, Gold May Fall as US Retail Sales Data Boosts QE Taper Bets

Daily Chart - Created Using FXCM Marketscope 2.0

Gold Technical Analysis (Spot)- Prices put in a Hanging Man candlestick below resistance at 1297.75, the 38.2% Fibonacci retracement, signaling indecision and warning that a pullback may be around the corner. Near-term support is at 1252.80, the 23.6% level, with a break beneath that eyeing swing lows at 1208.10 and 1180.15. Alternatively, a push above resistance exposes the 50% Fib at 1334.08.

Commodities_Gold_May_Fall_as_US_Retail_Sales_Boost_QE_Taper_Bets_body_Picture_4.png, Gold May Fall as US Retail Sales Data Boosts QE Taper Bets

Daily Chart - Created Using FXCM Marketscope 2.0

Silver Technical Analysis (Spot)- Prices broke above resistance at 19.76, the 23.6% Fibonacci retracement, after putting in a bullish Morning Star candlestick pattern. The bulls now aim to challenge the 38.2% level 20.73. The 19.76 mark has been recast as near-term support, with a reversal back beneath that eyeing the June 28 lowat 18.19.

Commodities_Gold_May_Fall_as_US_Retail_Sales_Boost_QE_Taper_Bets_body_Picture_5.png, Gold May Fall as US Retail Sales Data Boosts QE Taper Bets

Daily Chart - Created Using FXCM Marketscope 2.0

Copper Technical Analysis (COMEX E-Mini)- Prices are pulling back from resistance at the top of an emerging rising channel (now at 3.210) to approach support at 3.112, the 38.2% Fibonacci expansion. A break below that targets the channel bottom at 3.043 and the 50% level at 3.024. Resistance is reinforced by the 23.6% Fib at 3.221, with a reversal above that eyeing a horizontal pivot level at 3.270.

Commodities_Gold_May_Fall_as_US_Retail_Sales_Boost_QE_Taper_Bets_body_Picture_6.png, Gold May Fall as US Retail Sales Data Boosts QE Taper Bets

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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