Source: Jin10 Data
Bank of America pointed out that tonight's retail sales data will exceed economists' expectations and gold faces downward risks! The market also needs to pay attention to any hawkish signals from Fed officials...
The US will release the May retail sales data, known as "terrifying data," at 20:30 Beijing time on Tuesday. Bank of America expects that the May retail sales data rate will exceed the consensus expectations of economists.
Last month marked the first time in about a year that Bank of America's retail sales forecast had an error. This forecast is based on real-time debit card and credit card consumption data, which is usually accurate. It predicts a small increase in the retail sales rate, but the actual data unexpectedly recorded 0%, and the control group unexpectedly contracted by 0.3%.
Will tonight's retail sales data disappoint Bank of America's optimistic forecast for the second time in a row? Market analysts have expressed doubts about this, given Bank of America's amazing hit rate.
Considering this, Bank of America reports that the total credit card consumption of households (HH) in May increased by 0.7% year-on-year, but after seasonally adjusted (SA), it fell by 0.9% month-on-month, measured by the comprehensive credit card and debit card data of Bank of America Merrill Lynch.
It is worth noting that in April, the per capita consumption of Bank of America Merrill Lynch credit card surged 1.3% month-on-month, while the ratio in March fell 0.7%. Bank of America attributed these large fluctuations to the continuing influence of the unusually early Easter weekend this year.
As Bank of America economist Aditya Bhave said, "Seasonal distortions have affected retail sales data in four of the past five months. Economists do not like to discuss these issues, but we have to face them again. Bank of America's credit card consumption is usually lower on Easter Sunday, which usually falls in April. However, this year it fell on March 31. It seems that our seasonal factors have not fully taken into account this change. This reduced the SA consumption level in March and boosted the consumption data in April. Conversely, we believe that the SA consumption growth in May looks weak due to unfavorable base effects."
In short, this is another month when real data will be distorted by seasonal adjustments. Foreign media said that because it is unclear which direction the Biden administration's Census Bureau will try to push the numbers, predicting tonight’s release of retail sales data may be a gamble.
Even so, this does not prevent Bank of America from making predictions. The bank wrote that US retail sales data in March was very strong, while data for April was weak. Therefore, Bank of America attempts to reconcile differences between its own seasonal factors and the Census Bureau. The bank expects that the retail sales rate (excluding autos) and the core control group rate (retail sales excluding autos, gasoline, building materials, and restaurants) in May will both increase by 0.3% and 0.6%, respectively.
If Bank of America's forecast is accurate, the May retail sales data rate in the US will exceed economists' consensus expectations of 0.2%.
There is another variable: the US government's retail sales data has undergone significant revisions this year (all other data as well), including upward revisions (March report) and downward revisions (January, February, and April reports). Bank of America pointed out that the risk is that "this trend may continue" (especially downward revisions). Revisions to previous retail sales data, all other conditions being the same, may affect the month-on-month growth rate of retail sales in May.
Bank of America also observed that residents in the northeastern United States accelerated their credit card consumption around Memorial Day this year, while residents in other areas slowed down.
By contrast, there was no "peak consumption of Memorial Day" anywhere last year.
This year, residents in the northeastern United States have once again increased their consumption around Memorial Day, although not as significantly as in 2019. This may indicate that the economic vitality in that region is continuing to recover. At the same time, the decline in consumption by residents in other regions is smaller than that in 2019.
Technical analysis of gold prices
Fxstreet analyst Dhwani Mehta pointed out that if retail sales data greatly exceeds expectations or the Fed releases hawkish remarks, gold prices may face new selling pressure. Currently, the market expects that the MoM growth rate of US retail sales in May will be 0.2%, and the MoM growth rate of core retail sales in May is expected to record 0.2%, the same as in April. Although gold prices have shown interval fluctuations in the past week, risks still tend to be downward.
The upward space of gold price is limited to $2345, and the 21-day simple moving average (SMA) and the 50-day SMA hover around this level. On the other hand, the downside seems to be supported by the low point of $2277 on May 3.
The 14-day relative strength index (RSI) remains bearish below the 50 level, with the current value near 48.00, proving the rationality of the downside risk. Immediate support is at the $2300 mark. Breaking below this level will test the low point of June 10 at $2287. Continuously breaking the latter will threaten the low point of May 3 at $2277.
Any rebound in gold prices needs to be tested around the key resistance level of $2345. Breaking through this level, gold buyers will attack the high point of $2364 on May 24, and then rise to the high point of $2388 on June 7.
Editor/Lambor