Gold resilient as US retail sales beat

Another solid night for precious metals overnight, with gold prices trading as high as USD $1332 per ounce, before easing to USD $1326.

An escalation of tensions in the Ukraine, with the government in Kiev handing out ultimatums to “Russian separatists” which were ignored, increased the odds of some kind of at least minor military conflict, which no doubt helped precious metals stay bid.

A wild trading day on Wall Street also helped support metals, with markets green currently but not without some violent moves. The NASDAQ opened at 4038 and climbed as high as 4050 at one point, only to collapse to 3986 later in the day (a 1.60% swing), before finally recovering somewhat to sit at 4022.

Economic data overnight from the US was actually quite good, with US business inventories growing for the ninth month in a row, and with retail sales surging by 1.1% (with prior months revised up), and retail sales ex autos also up an impressive 0.7%.

Auto sales themselves were up 3.4%, and 10% from a year ago, not surprising considering non-revolving credit numbers of late. Electronics and appliance store sales were not so encouraging, down 1.6% in month, which isn't what you'd expect to see if the housing market was flying.

Industrial production figures in Europe were also up 0.2% on the month and 1.7% on the year I

n other news, headline Citigroup EPS and revenue beat expectations, but as usual what was lurking beneath the surface was far less encouraging, with mortgage originations dropping to a record low, whilst Citicorp – the main operating subsidiary, saw revenue actually decline by 5%.

US CPI figures will be a highlight tonight, as will NAHB housing data, whilst Coca Cola, Johnson and Johnson and Intel are all reporting.

Gold is in a technically solid position, and with opportunity cost in the form of longer-term yields falling (US 10 years at 2.65% and the 30 year below 3.50% now), there is no reason to expect a sudden plunge. Indeed, the strength in the metals was encouraging overnight, as a US retail sales beat at the headline level like the one we saw last night would have seen gold sold aggressively last year. Slowly, the narrative is turning.

Having said that, economic data is decent and there’s no reason to expect the Fed to taper tapering, so there is no major bullish catalyst right now, unless equities tank and/or the Ukraine situation takes an unfortunate turn for the worse.