In the US market on Monday, retail sales data for March released by the US increased more than expected. The yield on 10-year US Treasury bonds once reached 4.636%, a record high in 5 months. Affected by “scary data” that exceeded expectations, and under the pressure of stronger US debt, spot gold fell sharply in the short term. At one point, it dived close to $30, then rebounded about $13 in the short term.

COMEX's most active gold futures contract instantly traded 2,555 lots within one minute from 22:06 to 22:07 Beijing time on April 15, with a total trading contract value of US$601 million

COMEX's most active gold futures contract instantly traded 2,947 lots within one minute from 22:11 to 22:12 Beijing time on April 15, with a total trading contract value of US$692 million

COMEX's most active gold futures contract instantly traded 2,346 lots within one minute from 22:37 to 22:38 Beijing time on April 15, with a total trading contract value of US$553 million

Why dive all of a sudden?

Wells Fargo's Tim Quinlan and Shannon Grein said in the report that the higher-than-expected retail sales in the US show that the economy is still hot. “The indicators of core expenditure recorded the biggest increase in a year or more. This did not indicate a drop in prices, which posed an upward risk to our forecast of 2.3% increase in consumer spending in the first quarter.” Retail sales increased 0.7% in March, and retail sales were revised from 0.6% to 0.9% in February. Quinlan and Grein pointed out that Easter sales are earlier than usual and may bring “some correction in April.”

Fxstreet analyst Sagar Dua said that the easing of the situation in the Middle East has caused precious metals to lose their luster in the short term. US President Joe Biden said that the US will not support Israel's counterattack against Iran. Investors believe that Iran's air strike on Israel was only in retaliation for the attack on its Syrian embassy near Damascus. As Tehran said, the tension between Iran and Israel is not expected to escalate further, and “this matter is considered over.”

Furthermore, as the US CPI in March exceeded expectations, expectations for the Federal Reserve to cut interest rates weakened at the June and July meetings. San Francisco Federal Reserve Chairman Daly said on Friday that there is no urgent need to cut interest rates. Daly added that there is more work to be done to ensure that the inflation rate returns to the expected level of 2%. She also stressed that as long as it is necessary for inflation to return to the 2% target, interest rates will remain limited, which puts some pressure on the price of gold.

Boston Federal Reserve Chairman Collins said she hoped domestic demand in the US would begin to slow down and support lower inflation later this year. Collins said that in the latest bitmap, she predicted that interest rates would be cut twice. Most of the Fed members expect the central bank to cut interest rates three times before the end of the year.

Meanwhile, better-than-expected monthly retail sales data for March boosted US Treasury yields and the dollar. Retail sales increased by 0.7%, more than double the 0.3% forecast. Retail sales increased by 0.9% in February, higher than the forecast of 0.6%. Strong spending by American households remains a major catalyst for rising inflation, enabling businesses to charge consumers higher fees.

Sagar Dua pointed out that the price of gold started from a record high of around $2,430 and fell slightly after the Relative Strength Index (RSI) peaked at around 85.00 on the 14th. As the RSI remains in the 60.00-80.00 bullish range, the bulls have remained strong recently. However, the momentum oscillator is cooling down after being extremely overbought.

Sagar Dua said that on the downside, the low of $2,268 on April 5 and the high of $2,223 on March 21 will be the main support areas for gold prices.

A once-in-a-lifetime shopping destination?

Peter Spina (Peter Spina), founder and president of investor websites GoldSeek.com and SilverSeek.com, said that the unprecedented escalation of tension between Iran and Israel will “come to the market in the form of fear.”

Spina said that if there is a major sell-off in the financial market, precious metals may be affected by some spillover effects. As in the past, stock market sell-offs may cause investors to look for ways to make up for losses, including selling their precious metals holdings.

“This could be a once-in-a-lifetime buying opportunity for precious metals,” Spina said. “The price of gold reflects various problems and risks. If these very serious events in the Middle East are not quickly downgraded, the premium for fear war may increase now.”

Currently, Spina said, “Prices will fluctuate greatly as the market tries to assess the situation.”