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Gold and silver battered after the release of August 2021 retail sales

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Gold and silver prices both had a virtual meltdown following the release of a report by the U.S. Census Bureau detailing monthly sales for retail and food services in August 2021. The report indicated an increase in consumer spending of 0.7%, totaling sales of $618.7 billion.

The report said that “Advance estimates of U.S. retail and food services sales for August 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $618.7 billion, an increase of 0.7 percent (±0.5 percent) from the previous month, and 15.1 percent (±0.7 percent) above August 2020.  Total sales for the June 2021 through August 2021 period were up 16.3 percent (±0.5 percent) from the same period a year ago. The June 2021 to July 2021 percent change was revised from down 1.1 percent (±0.5 percent) to down 1.8 percent (±0.2 percent). Retail trade sales were up 0.8 percent (±0.5 percent) from July 2021, and up 13.1 percent (±0.7 percent) above last year. Clothing and clothing accessories stores were up 38.8 percent (±3.3 percent) from August2020, while gasoline stations were up 35.7 percent (±1.6 percent) from last year.”

This report had a huge impact on the market sentiment of gold, silver, and the dollar. The U.S. dollar index gained 0.36% and is currently fixed at 92.855. However, it was gold and silver pricing that got absolutely devastated in trading today. As of 5:00 PM EDT gold futures basis, the most active December 2021 Comex contract is down by $41, a drop of 2.26%, and fixed at $1753.80. Silver futures basis, the most active December 2021 contract lost $0.91 (-3.83%) and is currently fixed at $22.89.

The shift in market sentiment is based on the belief that today's strong retail sales numbers will strengthen the tapering narrative at this month’s FOMC meeting. The FOMC meeting will begin when the Federal Reserve members meet on September 21.

According to Reuters, Bob Haberkorn, senior market strategist at RJO Futures, said, “Gold has taken a pretty big hit, with the upside in the dollar and Treasury yields and the stronger data … you have longs running for the exit.” Haberkorn added that “Unless there is some geopolitical event or a Fed surprise, gold’s trajectory is unlikely to change going into the FOMC meeting.”

Our technical studies indicate that the first level for potential support in gold occurs at the 61.8% Fibonacci retracement, which is currently fixed at $1738.40, followed by the 78% retracement, which is currently fixed at $1712.80. The data set used to create the retracement begins after the flash crash that occurred on August 9 when gold traded to a low of $1678.10, up to the highs achieved on September 3 when gold peaked at $1836 per ounce.

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer