Gold spot price down 2.5% on positive US Retail Sales, poor Jobless Claims notwithstanding

on Dec 12, 2013
Updated: Oct 21, 2019
Listen Thursday, December 12th:_ Spot gold is currently more than two percent down intraday at $1,229.20 an ounce, moving well away from the three-week top of $1,267.26 hit on Tuesday on a wave of short-covering.

US consumers spent more than expected in November, boosting hopes for continued enhancement in economic growth in the coming months. Retail Sales m/m rose 0.7 percent from October, marking the strongest rate of gain since June and beating forecasts for growth of 0.6 percent. A jump in car sales to a six-year high was influential but better results were logged in almost all surveyed sectors.

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Core Retail Sales m/m – which excludes automotive – were up 0.4 percent in November, beating the expected 0.2 percent increase.
The good results for last month suggest a solid start to the Christmas holiday shopping season, a major provider of revenue to retailers.
Unemployment Insurance Initial Claims rose sharply last week, by 68,000 to 368,000, which is the biggest increase in more than a year. Expectations had been for an increase to 320,000.

Analysts note that the extended Thanksgiving weekend may have distorted the data. The prior week reading was revised upward to 300,000 from the initial 298,000 and the rolling four-week average rose to 328,750.
The Department of Labour noted that the data was likely affected by seasonal adjustments, typical for this time of year.
The Dollar Index rose by 0.3 percent to 80.100 after release of the Retail Sales data, and has so far been indifferent to the jobless numbers.

The gold spot price has fallen more than two percent so far today, with the week’s short-covering rally fading as expectations rose for Fed tapering after a budget deal was reached in Washington DC.
VTB Capital analyast Andrey Kryuchenkov opines that “since there was very little behind the surge higher, aside from a weaker dollar, the short-term longs will be unwinding, while physical activity slowed”. He thinks the retracement could hit 1220.00 and that “we will side-track near December lows ahead of the Fed meeting, still hostage to dollar sentiment”.

In the view of Standard Bank analyst Walter de Wet, “The US budget agreement takes away another part of uncertainty for the Fed because they don’t have to worry about another government shutdown.” He believes that consideration “on balance goes in favour of the argument that the Fed is going to start tapering sooner rather than later”.
Harshad Ajmera, proprietor of JJ Gold House, reports that supplies in India today were “short in the market” and notes that gold premiums on London prices were steady at $120 an ounce.
The physical holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Shares, fell by 2.1 tonnes yesterday. For the year to date, SPDR’s holdings are down more than 500 tonnes, near a five-year low.
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