XAUUSD “trapped” ahead of US retail sales data

• XAUUSD bulls take breather after printing “monster" move

• "Inside-bar” typically reflects a pause

• Gold’s pause may be short-lived if Middle East conflict escalates further

• Incoming US retail sales data may trigger gold volatility

• Today’s closing price may offer strong clue on gold’s next move 

Gold bulls have taken a breather in recent sessions.

This comes after the “monster” move up on Friday, October 13, where it was resisted by a widely-followed technical indicator. 

Yesterday (Monday, October 16th’) the shiny metal’s price action posted a bearish close while forming an “inside-bar” pattern (considering both candlesticks) 

NOTE: An "inside-bar" is a candlestick whose range is within the range of the previous candlestick. It typically reflects a pause in the a trend.

This pause in XAUUSD may be short-lived, especially given the ongoing tensions in the Middle East.   

At the time of writing, XAUUSD-daily appears trapped between its: 

• 200-day simple moving average (SMA): recently acting as dynamic resistance
   

• and the 78.6 Fibonacci level at $1918.06, when drawn from September 20th’s high of $1947.37 to October 6th’s low at $1810.40, is currently acting as support.

However, this pause in XAUUSD may be short-lived, especially given the ongoing tensions in the Middle East. 

Gold traders brace for US retail sales

Economists are predicting a slowdown in consumer spending in the world’s largest economy, with US retail sales growing by 0.3% compared to August 2023 (month-on-month). 

If so, this would be its second-slowest monthly growth rate for the year (slowest = June's 0.2% m/m growth). 

• A stronger-than-expected US retail sales data, which underscores the still-resilient US economy, may embolden the Fed to trigger one more rate hike in this cycle.
  
  Such prospects could force XAUUSD to unwind more of last Friday’s “monster” move up.
  
   
• On the other hand, gold could be restored to recent heights if traders see a weaker-than-expected US retail sales figure.
  
  After all, weakening retail sales growth would suggest that the world’s largest economy is cracking under the weight of over 500 basis points in Fed rate hikes since last year. 

From a technical perspective … 

A strong close below the current support at the 78.6 Fibonacci level around $1918 may give gold bears some respite, as they target these levels further south: 

•  $1900: psychologically-important level, with the 50-day SMA hovering nearby 

• $1895.05: 61.8 Fibonacci level as the next potential near-term support. 

To the upside, gold bulls will be eager to conquer these levels: 

• 200-day SMA

• $1940 region: a key battleground between bulls and bears on several occasions so far in 2023 

In the meantime, of course, spot gold remains susceptible developments surrounding the storm brewing in the Middle East.