gold traders be aware: the price of gold is going to be dependent on a few variables over the coming week.
Two significant calendar events out of the US will be firing off the next four days. The first is the Inflation Rate YoY updated for March, due Wednesday 14. The market consensus is that inflation will be up by about a percentage point, somewhere around 2.5% to 2.6%. In February, the inflation rate came in at 1.7%, up .3 percentage points from the previous month.
If inflation comes in as expected, or, higher, we might see 10-Y treasury bond yields retrace their March accent, possibly up to the 1.740% range. In this event, gold may break through the US$1,650 support level it has twice bounced off in the past couple of months. A consolation may occur in between this support level and the historical touchstone in the high US$1,500s.
Market consensus predictions for the inflation rate have overestimated inflation for the past year. Although, typically by only one percentage point. Perhaps the analysts have given more prudent predictions for March and will hit the nail on the head this time.
US Retail Figures for March
The second event to be mindful of this week is US retail sales figure for March. This report is appearing at the end of the week. A historical view shows us that the US retail figures have been relatively flat for the last six months of 2020, never changing by more than 1.7% in either a positive or negative direction. 2021 is a different story, though. Sales lifted to a positive 7.6% in January, which lead into a negative 3% in February. The market consensus is that retail sales will again bounce back to somewhere in a positive 4 – 6% range.
Gold traders should keenly watch the retail sales figures as these are great early indicators of how the economy is performing. The figures can be used to predict GDP and inflation trends. For one, high sales figures could lead to higher expected inflation next month, which flows onto bond yields.