Will Gold Continue to Fall After Breaking the $1900 Level?

Yesterday (Aug 16th), the US reported a month-on-month increase of 0.7% in retail sales for July, surpassing market expectations of 0.4%. This marks the largest growth since January 2023, with four consecutive months of expansion.

Following the data release, the US dollar index experienced a short-term increase of 20 points. The yields on the 10-year and 2-year US Treasury bonds briefly surged to 4.270% and 5.024%, respectively, reaching new highs since October 24th of last year and July 7th of this year. Gold, on the other hand, dropped by $6 in the short term and briefly fell below the $1900 level.

Regarding this better-than-expected data, Forexlive believes that the four-month consecutive rise in US retail sales highlights the sustained strength of US consumer spending. This contributes to boosting forecasts for US GDP in the third quarter, despite already optimistic predictions. While there are concerns about various factors affecting the global economy, the US is not among them.

Despite the current high-interest-rate environment in the US, the higher wage levels of American consumers contribute to strong demand and provide some support to the economy, weakening signs of an economic downturn. Additionally, last week's US CPI and PPI data implied that high inflation may persist for a longer duration, which could support the US dollar. However, according to predictions from CME Group's FedWatch, market expectations for further rate hikes by the Fed remain low. Therefore, the likelihood of a sharp rise in the US dollar and a significant drop in gold is limited. As a result, we expect gold to experience a slight decline in the short term.

From a technical standpoint, gold has already broken the $1900 level twice, indicating a bearish outlook. If there is a rebound, it would be necessary to observe whether it can surpass the key resistance level at $1930. The key resistance level is at $1930, with a support level at $1803.

Source:Investing.com