Gold pulls back down following release of US Retail Sales data

• Gold price falls after the release of US Retail Sales data for August. 
• Traders now await the key Fed policy decision, with probabilities favoring a larger 0.50% cut to interest rates.
•  Such a move would boost the attractiveness of Gold.  
• Analysts call a 10-year secular bull trend starting for commodities, including Gold. 

Gold (XAU/USD) pulls back to the $2,570s after the publication of US Retail Sales data for August on Tuesday – the last major US macroeconomic data release before the Federal Reserve (Fed) makes its decision on Wednesday. 

US Retail Sales rose by 0.1% in August month-on-month, compared to the revised-up 1.1% rise registered in July. This was above consensus expectations of a 0.2% decline, according to data from the US Census Bureau.  

US Retail Sales ex Autos, meanwhile, rose by 0.1% after a 0.4% increase in July. This was below estimates of a 0.2% rise. 

The data slightly reduced the probabilities of the Federal Reserve (Fed) cutting interest rates by a larger 0.50% at its September meeting, weighing marginally on Gold. Prior to the release the probabilities stood at 67%, after the data they had changed to 65%, according to the CME FedWatch tool. 

Gold surges as bets increase the Fed will double cut

Gold shot to an all-time-high (ATH) of $2,589 on Monday after market bets that the Fed will make a double-dose 0.50% cut to interest rates at its meeting on Wednesday rose sharply, according to market-based gauges. 

The expectation that the Fed will slash interest rates is positive for Gold because it lowers the opportunity cost of holding the yellow metal, which is a non-interest-paying asset, thus making it more attractive to investors. 

Gold is entering a bullish super-cycle, analysts say

Longer-term prospects for the precious metal remain upbeat, according to several leading analysts, who are arguing there is evidence that commodities – including Gold – are entering a new bullish super-cycle. 

“The last [two] times we saw these valuations for commodities was 1971 and 2000,” tweeted Michaël van de Poppe, Founder of MN Consultancy. “Commodities & #Crypto are extremely undervalued and it’s likely that commodities go into a 10-year long bull market.”

Van de Poppe is not the only commentator saying commodities are entering a secular bull market. According to a recent “Flow Show” note from Bank of America Investment Strategist Jared Woodard, a “commodity secular bull market in the 2020s is just getting started as debt, deficits, demographics, reverse-globalization, AI & net-zero policies are all inflationary,” reported Kitco News. 

Technical Analysis: Gold stalls in uptrend

Gold’s price has pulled back into the $2,570s, however, the trend is still bullish in the short, medium, and long-term. Given that it is a principle of technical analysis that “the trend is your friend,” the odds favor more upside. If there is a correction, therefore, it is likely to be short-lived before Gold resumes its broader uptrend.

XAU/USD Daily Chart

Gold is not yet overbought according to the Relative Strength Index (RSI), but it is close to overbought. If it enters the zone on a closing basis it will advise traders not to add to their long positions – nevertheless the rally may continue. If the RSI enters overbought and then exits back into neutral it will be a sign of a deeper correction.  

In the event of a correction, firm support lies at $2,550, $2,544 (0.382 Fibonacci retracement of the September rally), and $2,530 (former range high).