Gold prices plunged in the international market as the dollar prices rebounded over improved sales figure in the domestic economy. The gold prices dropped with COMEX Gold Futures dropping from the level of $1281.90 (Day’s high on 22nd April 2019) to currently hovering around $1275.
The factor which exerted the pressure on gold prices was the improved retail sales figure in the United States. As per the data, the U.S. Core Retail Sales (retail sales excluding Automobile) for March 2019 increased by 1.2% against the market expectation of 0.7% growth and previous month’s decline of 0.2%. The improvement in the retail sector marked improvement in the economic condition of the United States, which in turn, supported the dollar prices.
Dollar Index soared over the improved data from the level of 96.82 (Day’s low on 17th April 2019) to the level of 97.48(Day’s high on 18th April), which further exerted pressure on gold prices. The dollar index is currently hovering around 97.33.
The Retail Sales figures, which includes the automobile sales also improved, and as per the data, the retail sales marked an increased by 1.6% for March 2019, as compared to the market expectation of 0.9%.
Apart from the improvement in retail sales, the Unemployment Claims declined in the United States, and as per the data, the U.S. Weekly Unemployment Claims stood at 192K for the week ended 12 April 2019, against the market expectation of 207k and previous week’s figure of 197k.
The improvement in employment coupled with the increased retail sales in the United States signified an improvement in the domestic economic condition, which in turn, catapulted the dollar prices, thereby raising the market expectation in terms of return from other asset classes. The yield-to-maturity (market discount rate) on the US Government 10-year bond rose from the level of 2.549% (Day’s low on 18th April) to the level of 2.592% (Day’s high on 22nd April).
The rise in dollar prices coupled with a surge in marked discount rate exerted pressure on bullions.
However, the prices of silver lost slight leverage against the gold prices, and the gold-to-silver ratio (XAU/XAG) rose from the recent level of 84.56 (Day’s low on 17th April 2019) to the present level of 85.01. The silver prices previously marked high leverage against gold.
The decline in the weekly unemployment claims signifies an improving and steady job creation in the domestic market of the United States, which acts as a fundamental building block for other indicators. A better job opportunity leads to higher expenditure by the consumers, which prompts businesses in the market to expand rapidly, which in a cascade creates high manufacturing and high sales in the domestic market.
To further reckon the trend in gold prices, the market participants will closely monitor other macroeconomic data such as Advance GDP of the U.S, Consumer Sentiments and Inflation Expectations, Core PCE price index, etc., which are all due for the week.
Apart from the significant macroeconomic indicators, the investors and speculators may keep an eye on the development in the U.S-China trade talks. Other than the U.S-China trade talks, the market participants may closely monitor the development in Brexit, as the parliament holidays in the United Kingdom ends on 23rd April 2019.
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