Gold Price Faces Pressure: Impact of Strong US Retail Sales and Concerns Over China’s Economic Outlook

During Wednesday’s Asian trading session, Gold’s price, denoted as XAU/USD, is hovering near the $1,901 level. The prior day saw the precious metal weighed down by concerns arising from the release of strong US Retail Sales figures, which increased the prospects of the US Federal Reserve (Fed) tightening its monetary policy.

The US Retail Sales data for July came out stronger than anticipated, with a growth of 0.7%, surpassing both the prior month’s increase of 0.3% and the market’s forecast of 0.4%. Such robust data suggest a flourishing US economy, fueling speculations that the Fed may contemplate adjustments to its monetary policy during the upcoming September meeting. This could diminish the allure of non-yielding assets like Gold.

Meanwhile, concerns over China’s faltering economic momentum are casting shadows on Gold’s stability. A surprising move by China’s central bank to trim the one-year medium-term lending facility (MLF) rates by 15 basis points to 2.50% might escalate the downward pressure on Gold. This decision was coupled with China’s lackluster July Retail Sales, which grew by 2.5% YoY, lagging behind both the anticipated 4.8% and the previous month’s 3.1%.

Additionally, the Industrial Production figures trailed at 3.7% YoY against the expected 4.5% and last month’s 4.4%.

In contrast, the US Dollar Index (DXY), a metric gauging the US Dollar’s potency against six major currencies, is on an ascent, marking its fifth consecutive day of gains. Currently, the DXY is positioned at approximately 103.20. The resurgence of the US Dollar can be attributed to the influx of positive economic data from the US, which potentially boosts the demand for USD at the expense of Gold.