Gold Edges Lower As U.S. Retail Sales Push The Dollar and Bond Yields Up

Gold bars

Gold prices fell on Monday, pressured by the higher-than-expected U.S. retail sales for September. The robust data reinforced expectations for a sooner-than-anticipated interest rate hike. It pushed the U.S. 10-year Treasury yields close to multi-month highs, which raised the opportunity cost of holding the non-interest-bearing bullion. The greenback also rose and made the yellow metal more expensive for investors using rival currencies.

Spot gold is currently trading at $1,763.94 per ounce as of 0735 GMT.

On Friday, the Census Bureau reported that retail sales rose 0.7% in September. It beats analysts’ forecast of a 0.2% decline. The strong-than-expected sales came against a backdrop of rising inflation, pervasive supply chain problems and the spread of the delta variant.

IG markets analyst Kyle Rodda commented that price pressures might force central banks to tighten monetary policies. That would not be good for the yellow metal. He also mentioned that supply bottlenecks are pushing inflation higher. And this would compel central banks to address inflation risks even at the expense of weaker economic growth.

DailyFX analyst Thomas Westwater added that high-impact economic events would determine the gold’s price outlook.  One of these is the slowdown of the Chinese economy.

The National Bureau of Statistics reported that gross domestic product (GDP) expanded by only 4.9% in the third quarter. It missed economists’ forecast of 5.2%. It was also lower than economists’ forecast of 5.2%. It was also way lower than the 7.9% growth in the second quarter, and the record 18.3% in the first. The second-largest economy in the world has been struggling with a slowing property sector, soft consumption and faltering economic activity due to power outages and supply chain bottlenecks. It led some experts to predict that China may announce stimulus measures in the coming months.

Another event is the interest rate hike in the UK. Bank of England (BoE) Governor Andrew Bailey hinted that the British central bank may need to raise interest rates to address inflation risks. He explained that rising energy prices would push inflation higher. The BoE predicted it to go over 4%, which is more than twice its target. When the economy reopens, the high inflation rate will cause labor and supply shortages. Some analysts expect the BoE to raise rates later this year or early in 2022.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, slipped by 0.3% from 982.72 tons on Thursday to 980.1 tons on Friday.