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Fundamental Gold Prediction: The US Dollar Weighs on Gold. Will U.S. Retail Sales Change Direction?

Daniel Rogers

May 16, 2022 11:15

Gold prices declined further last week as traders considered the likelihood of an economic recession in light of the Federal Reserve's more hawkish stance. This was supported by a number of inflation reports from the United States. The consumer price index (CPI) for April came in at 8.3 percent year-over-year, exceeding analysts' projections of 8.1 percent year-over-year. The producer price index (PPI) for the same period shows that factory-gate prices have risen by 11.0 percent year-over-year.

 

This batch of inflation data contributed to the dollar's appreciation against the majority of its major rivals. A stronger Dollar often works against the price of bullion. Due mostly to Finland's announcement that it plans to strongly pursue NATO membership, the Euro depreciated. This drew a strong response from Russia, which vowed to respond, so reinforcing the risk-averse sentiment that has been permeating the Eurozone.

 

During the upcoming week, traders will closely monitor numerous high-profile data releases that may affect XAU prices. The US retail sales report for April may have the most impact on market mood. According to a Bloomberg survey, analysts expect April retail sales to increase by 0.7% month-over-month. A stronger-than-expected figure may alleviate some concerns about an impending economic recession. As the US Dollar has been operating as a safe haven for traders, this would likely serve to weaken the currency and may allow gold to climb by reducing risk aversion.

Gold versus US Dollar Chart Weekly

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