Retail sales may pose some risk to the gold price – London Business News | Londonlovesbusiness.com

While the outcome of today’s US retail sales may pose some risk to the gold price, unless the sales data truly shocks, then the fallout should be limited with few prepared to go hard on putting new money to work until clarity from the Fed meeting prevails.

With gold traders long and strong, and with the price consolidating at all-time highs, those positioned for a break of $2600 need to hear a message that inspires new buying of gold, and it is not overly clear what that message needs to be.

On one hand, I could argue that a 50bp cut married with a more concerned message could keep US2yr Treasury yields headed lower, which in turn would support gold – however, as we’ve seen in recent episodes, if equity tanks, even if the triggers are fundamentally supportive of gold price appreciation, then the yellow metal can get caught up in the broad de-risking and the liquidation seen in risky assets.

Conversely, I’m not convinced a 25bp cut would be all that bad for the gold market – this call is conditional on the Fed indicating they have the appetite for bolder action in the November or December meeting if the data warrants, and we see equity trade higher – where increased risk appetite hits the USD.

The fact is, the playbook for how gold can plays out this week is diverse, and if you ask 10 people how this all goes down and where the balance of risk sits, you’ll likely get 10 different answers – an open mind is therefore essential, but I do sit in the camp that weakness in gold from the FOMC meeting is a gift and should be define a more compelling entry for long positions.