The document discusses recent economic data and Federal Reserve Chair Powell's testimony. Retail sales surged 17.7% in May but were still down 6% from a year ago. Powell reiterated that the Fed will remain accommodative and that a full economic recovery is unlikely until the coronavirus is contained. Strong economic reports may boost risk appetite at the expense of gold, but the Fed's dovish stance and low real interest rates should continue to support gold prices. Gold broke out of a trading range technically and may rise further but also faces resistance.

1. Surging Retail Sales, Cautious
Powell, And Gold

2. Point To Be Covered Today:
• Optimism Among Investors Is Bad Things For
Gold.
• Gold & Other Safe Havens
• Powell's Testimony And Gold
• Implications For Gold
• Gold & 10-YearInflation –Indexed Treasury
• Gold Technical & Fundamental Overview

3. Optimism Among Investors Is Bad
Things For Gold
• In his testimony, Powell reemphasized that the Fed will be very
accommodative for a long period of time, with potentially being
even more dovish if the second wave of infections occur.
• The U.S. central bank is not concerned about inflation, but about
lack of growth and unemployment rate.
• Although the upcoming economic data could be very positive due
to the very low base, investors should not overreact and remember
that there is still long way to recovery.
• This is, however, what they should do. But they don't. The market is
ignoring the bad news and focusing on the positives. After all,
things turned out to be not so apocalyptic as the initial March
assessment suggested.
• Moreover, the interest rates and bond yields are ultra low, while the
Fed stands ready to intervene, which increases market confidence.

4. Gold & Other Safe Havens
• Retail sales came in really strong in May, which could
strengthen risk appetite, but the dovish Fed should support
gold.
• As the chart below shows, retail sales surged 17.7 percent in
May, as the U.S. economy started to reopen. The number was
a record high and above expectations, triggering optimism in
the marketplace.
• However, the sales were still 6 percent lower than a year ago,
which means that the coronavirus crisis has not ended yet.
• But such reports may, nevertheless, increase the risk appetite
among investors at the expense gold and other safe havens.

5. Retails Sales ( Monthly % Change)

6. Industrial Production
• Another sign that the US economy began to
revive in May, was the increase in industrial
production by 1.4 percent, as many factories
resumed operations.
• However, the number came below
expectations, and the industrial production
was still 15.4 percent below its pre- pandemic
level, as one can see in the chart below.

7. Industrial Production Index

8. Powell's Testimony And Gold
• On Tuesday, Powell testified before the Senate Banking
Committee.
• His prepared testimony was not much different than from
his earlier remarks during the press conference after the
June FOMC meeting.
• Powell reiterated his cautious view about the economic
outlook and that he does not expect a V-shaped recovery:
the levels of output and employment remain far below
their pre-pandemic levels, and significant uncertainty
remains about the timing and strength of the recovery.
• Much of that economic uncertainty comes from
uncertainty about the path of the disease and the effects of
measures to contain it.

9. Powell's Testimony And Gold - I
• Until the public is confident that the disease is
contained, a full recovery is unlikely.
• Moreover, the longer the downturn lasts, the greater
the potential for longer-term damage from permanent
job loss and business closures.
• Therefore, according to Powell, investors should not
overreact to surprisingly good economic data such as
the May nonfarm payrolls or retail sales report.
• He said that the economy would go through three
stages: economic shutdown, the bounce-back as
people return to work and the economy "well short" of
the pre-pandemic level in February.

10. Powell's Testimony And Gold - II
• In other words, we are at the beginning of rebound, and many
economic reports may be very positive, but it should not be
actually surprising as they are coming off extremely low levels.
• What is crucial here is how will the economy evolve later.
• The new thing Powell said was admission that the latest Fed's dot
plot does not factor in a potential second wave of coronavirus
infections later this year, which is rather concerning.
• When asked by Senator Krysten Sinema whether "Does this
projection assume a potential second wave of coronavirus and the
accompanying economic impacts?", Powell replied:
• I would think the answer to your question, though, largely will be
that ... my colleagues will not principally have assumed that there
will be a substantial second wave.

11. Implications For Gold
• What does it all mean for the gold market? In his
testimony, Powell reemphasized that the Fed will be
very accommodative for a long period of time, with
potentially being even more dovish if the second wave
of infections occur.
• The U.S. central bank is not concerned about inflation,
but about lack of growth and unemployment rate.
• Although the upcoming economic data could be very
positive due to the very low base, investors should not
overreact and remember that there is still long way to
recovery.

12. Implications For Gold - I
• This is, however, what they should do. But they don't.
The market is ignoring the bad news and focusing on
the positives.
• After all, things turned out to be not so apocalyptic as
the initial March assessment suggested.
• Moreover, the interest rates and bond yields are ultra
low, while the Fed stands ready to intervene, which
increases market confidence.
• The optimism among investors is a bad things for gold
prices, but negative real interest rates and very
accommodative central bank should support the
yellow metal, as the chart below shows.

13. Gold & 10-YearInflation –Indexed
Treasury

14. Gold Technical Overview

15. Gold Technical Overview - I
• From a technical perspective, Wednesday’s strong move-up confirmed a
near-term bullish breakout through a one-week-old trading range.
• A subsequent move beyond the 200-day SMA might have already set the
stage for additional gains. Hence, some follow-through strength towards
the $1,845-46 region, en-route the next major hurdle near the $$1,866
area, now looks a distinct possibility.
• The momentum could further get extended towards the $1,880 level
before bulls eventually aim to reclaim the $1,900 round-figure mark.
• On the flip side, the overnight swing lows, around the $1,820 region,
nearing the trading range resistance breakpoint, now seems to protect the
immediate downside. Any further pullback might be seen as a buying
opportunity near the $1,808-07 zone.
• This is followed by the $1,800 mark, which if broken decisively will negate
any near-term positive bias and prompt some aggressive technical selling
around the XAU/USD.

16. Gold Fundamental Overview
• Gold remained on the defensive through the first half of the European session
and was last seen hovering near the lower end of its daily trading range, just
above the $1,820 level.
• A strong rebound in the US Treasury bond yields turned out to be one of the key
factors that prompted some profit-taking around the non-yielding yellow metal.
• Apart from this, a generally positive tone around the equity markets further
acted as a headwind for traditional safe-haven assets, including gold.
• That said, a subdued US dollar demand extended some support to the dollar-
denominated commodity and helped limit the downside, at least for the time
being.
• Market participants now look forward to the US economic docket, highlighting
the release of monthly Retail Sales figures. The data might influence the USD
price dynamics and provide some impetus to the XAU/USD.
• Apart from this, the US bond yields and the broader market risk sentiment could
further produce some short-term opportunities around gold.

17. Gold Fundamental Overview - I

18. Gold Technical Analysis
• Gold’s sustained upside break of 200-DMA gains support from
firmer MACD signals, not to forget successful trading beyond 100-
DMA and 13-day-old support line, keeps buyers hopeful.
• However, a horizontal area comprising early May’s top and mid-
June lows surrounding $1,845 will test the metal’s further upside.
• Also challenging the up-moves will be the June 02 lows near
$1,855 and the $1,880 levels before highlighting the $1,900
hurdle that holds the key to June’s peak of $1,916.
• Meanwhile, pullback moves need to close below the 200-DMA
level of $1,826 to test the short-term rising trend line support of
around $1,809. Though, bears are less likely to take the risk of
entry until gold prices stay beyond the 100-DMA level of $1,791.

19. Gold Daily Chart

20. Surging Retail Sales, Cautious
Powell, And Gold

21. THANKS FOR LISTENING
Surging Retail Sales, Cautious
Powell, And Gold