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.

ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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