By Barani Krishnan
Investing.com - The gold bull seems doomed with any early celebration these days.
After brief euphoria at having reclaimed its $1,800 perch, those long the yellow metal were hurtled back into the mid-$1,700 territory on Friday as strong U.S. retail sales for September led to a renewed spike in bond yields on speculation that the Federal Reserve might be forced to raise rates faster than it intends.
U.S. gold futures’ most active contract, December, settled at $1,768.30 per ounce on New York’s Comex, down $29.60, or 1.7%. The session low itself was $1,765.10. The only consolation was the weekly gain of 0.6%.
On Thursday, gold reached almost $1,802, crossing $1,800 the first time since Sept. 15, as it appeared to finally live up to its label as an “inflation hedge” and “safe-haven” days after oil prices hit seven-year highs above $80 per barrel.
But any illusion that the yellow metal would extend its two-day run-up to reach north of $1,900 and — eventually — the $2,000-plus record highs of August 2020 seemed put paid for now.
“Gold was unable to hold onto the $1800 level after a better-than-expected retail sales report and strong round of earnings sent U.S. Treasury yields higher, denting appeal to non-interest-bearing assets,” said Ed Moy, analyst at online trading platform OANDA.
While gold was ripe for profit-taking after its surge to $1,800 levels, “the downward move could extend if Wall Street continues to pump up equities”, Moya noted.
U.S. retail sales numbers for September released by the Commerce Department on Friday showed a growth of nearly 14% on the year and a steady monthly expansion of 0.7% since August.
Economists tracked by Investing.com had expected a monthly decline of 0.2% for September retail sales due to challenges from the pandemic, especially inflation from surging commodity prices led by oil. But almost every key sector of the economy saw positive sales instead, showing promise ahead of the holiday shopping season between October and December when festivities from Halloween to Thanksgiving and Christmas run.
The higher retail sales extended gains on the S&P 500, which already had its best day in seven months in the previous session.
“Gold bulls still need to be patient,” added Moya. “Gold appears poised to consolidate here, but the start of a new bullish trend is around the corner once the global economic recovery gets on track and the dollar loses its dominance.”