On Tuesday, the XAU/USD advanced towards $1,980 and displayed more than 1% gains. In that sense, as the Retail Sales hint at a decelerating US economy, US Treasury yields declined across the board, favouring the yellow metal’s price.
The US Census Bureau reported that the Retail Sales from June increased by 0.2%, lower than the 0.5% expected and the previous 0.5% monthly increase. Sales excluding the Automobile Sector also expanded but below the expectations at 0.2% vs the 0.3% expected by the Retail Sales Control Group, came in strong at 0.6% vs the 0.3% decline expected.
As a reaction, US yields are retreating, with the 2-year yield standing at 4.72%, while the 5 and 10-year rates fell to 3.97% and 3.77%, respectively, with the latter leading a decline showing more than 1% decreases. As US yields are the opportunity cost of holding non-yielding metals, their decline is tractioning the XAU/USD.
Focus now shifts to next week's Federal Reserve (Fed) decision, where markets have nearly priced in a 25 basis point (bps) hike. Due to soft inflation and weak Retail Sales, investors are now refraining from betting on an additional hike past July. Market participants will closely watch the Fed’s statement and Jerome Powell’s outlook for clues regarding forward guidance
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