The analysis in this article is a follow up from Gold (XAU/USD) Slides 2.2% to One-Month Lows. $3150 incoming?
Gold prices have surged around 3% from the Asian session lows around the $3125/oz handle. Gold had surged toward the $3180/oz handle ahead of the US open thanks in large part to a weaker US Dollar.
The US Dollar faced renewed selling pressure in the US session after a wave of economic reports, including data showing retail spending slowed in April as worries about the economy affected confidence.
US Data Weighs on the US Dollar
The Commerce Department reported that retail sales rose slightly by 0.1% in April, following a revised 1.7% increase in March. Economists had expected no change after the previously reported 1.5% rise in March. Meanwhile, the Labor Department said weekly jobless claims stayed steady at 229,000, matching economists’ predictions, though job openings have become scarcer.
Source: LSEG
The retail sales data does show that tariff impacts have for now been largely avoided thanks to pre-emptive buying in March. The PPI figure points to companies absorbing cost-related shocks for now, whether this will continue remains to be seen.
The concern is the drop in the retail sales figure which suggests that the pre-emptive buying has disappeared quickly which could be a sign of things to come.
US small businesses are getting more pessimistic about the economy:
The NFIB Small Business Optimism Index declined 1.6 points in April, to 95.8, its lowest since October 2024. 6 of the 10 index components decreased, with expected business conditions having the most negative contribution.Over the last 4 months, the index has fallen 9.3 points, the sharpest drop since the 2020 pandemic.
At the same time, the share of small firms expecting better business conditions 6 months from now has plummeted 37 percentage points, to 15%, the lowest since October 2024.
This in part aided the push by Gold beyond the $3200/oz mark and could be the catalyst for a deeper recovery.
Market Sentiment
Looking at overall client sentiment at OANDA and 71% of traders are net-long on Gold.
I, however, hold a contrarian view of client sentiment. Given that 71% of traders are long on Gold there is a possibility the precious metal may continue to face selling pressure.
Technical Analysis - Gold (XAU/USD)
From a technical analysis standpoint, gold is now up nearly 3% from its Asian session lows.
The break above the previous two-hour swing high at 3186 means a change in structure has taken place.
There is another swing high at 3240 which is the next area of interest which could come into play.
There is a probability of a pullback with support at 3195 and 3186 needed to hold if another leg to the upside is to materialize.
If Gold breaks above the 3240 then a run toward the 3272 and 3300 may be in offing.
Gold (XAU/USD) Two-Hour (H2) Chart, May 15, 2025
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