High Impact Events Trading... Gold & Copper

US Retail Sales - August Preview

1. Core Retail Sales m/m
2. Retail Sales m/m

Forecasts

1. Core retail sales is expected to come in at 0.4%, unchanged from prior month.
2. There is a divided consensus for those core retail sales estimates. While most economists are predicting a 0.4%, there are substantial forecasts at each interval, ranging from 0.2% to 0.6%.
3. Those core retail sales forecasts are slightly skewed, showing more economists think the core number will come in stronger than expected. Not by much though.
4. Retail sales is expected to show a slight tick down to 0.3% from 0.4% in the prior month.
5. There is less division in the overall retail sales number, although there are substantial forecasts outside of the 0.3% consensus, ranging from 0.2% to 0.4%.

Risk Assessment

1. It should be considered that this data will be released along with the Philly Fed Manufacturing Index and Empire State Manufacturing Index, both of which have had a heavier than normal impact in the recent two months, particularly on gold and precious metals.
2. Retail data could trigger a risk on or off environment as market participants are looking to this data for signals reflecting US economic health.
3. Data as expected or better will likely be USD positive, gold negative. Weaker than expected data will support gold prices and a corresponding drop in the USD.
4. Weak enough data that triggers risk-off, or any degree of flight to quality, will be positive for gold.
5. Both retail sales figures usually have revisions to the prior data. This can either exacerbate any initial move, or make any entries on the release of the data susceptible to whipsaws.

Possible Scenarios

1. There is a greater risk of a larger reaction in the USD related to better than expected data. Interest rate expectations are skewed towards a very dovish Fed. The CME FedWatch is showing almost 75% probability of the fed lowering rates by at least 50 basis points over the next two meetings (Sept, Oct). Any data that shows the US economy does not need that much easing has the potential to trigger large moves higher in the USD and a corresponding drop in Gold as traders adjust rate expectations.
2. There is a greater risk of a larger reaction in gold related to weaker than expected data. If this data triggers flight to quality, gold is at levels with little resistance and could see some follow through long after the release. Gold's downside risk has been and still is limited due to the current geopolitical environment. With that said, remember as the US dollar rises, gold prices will drop.
3. The above two scenarios are dependent on the actual data deviating significantly from forecasts.

Recent impact on Gold and US dollar

July - Although both retail sales figures beat expectations, the downward revisions to the prior month's data caused the price movements to be somewhat limited

June - The upward revisions to the prior month's data is what triggered the markets to react in favor of the USD as gold prices dropped.


Overview
As seen by the charts posted above, this data will have impact either from the actual data deviating from forecasts, revisions to the priors, or both. The revisions make this release risky enough, but this upcoming retail sales data will be accompanied by other data that has shown to have the market's attention, Philly Fed and Empire Manufacturing. There is the potential for big moves across asset classes at release time, especially if all the US data is in sync relating to signaling what the current health of the US economy is looking like. However, it's very unlikely that four actual releases (and revisions) are all in unison. This data could present some very good trading opportunities, but it's best to wait until after the release to see where the market is going. Keep an eye out for any risk trades after release time, that's where the potential with the least amount of risk lies.

Good luck out there!

Looks like a nice beat of forecast, but tempered by unemployment data perhaps? Did have an immediate dip from results, but Gold is heading back up and USD is not taking off.

Both Retail Sales and Core Retail sales were revised lower and FED has based their arguably hawkish outlook exactly on a strong consumer market. Another thing is that the surge is in online sales, and online sales are very volatile so they might have distorted the true number.

And also unemployment rose and the FED has emphasized many times that they find a strong labour market very important. If unemployment is rising this will lead to consumer purchasing power falling in the long run, so that's the problem.

On top of that, the main focus for gold pricing right now is the trade war and it's development, it has a MUCH larger impact then any of these data news.

This is why the USD didn't skyrocket as it perhaps should have.

This was a key factor in why the market didn't take the way better than expected number as it has in the past. Amazon Prime Day is the reason why it came in so strong, and since that's a one-off event (yearly), it didn't accurately reflect the health of consumer spending. Gold has limited downside risk because it's being supported by all the geopolitical turmoil. But I would have expected a bigger move from the data we saw earlier.

Your participation in the thread is great! The previews aren't guides to trading. We're just out here trying to help, hoping they provide some insight and to generate discussion so we can collectively, get a better handle on the markets. There's still an open slot for being a thread leader! Vorenzd and I welcome everybody's feedback.