Gold prices moved higher overnight and maintained their gains

The gold price rebounded Friday morning, gaining $12.47 to $1,680.54 per ounce in spite of a better than expected report on U.S. retail sales. Silver climbed alongside the price of gold, advancing 1.9% to $32.42 per ounce. Strength in gold and silver prices was fueled by modest weakness in the U.S. dollar, which lost 0.3% against a basket of the world’s leading currencies.

Gold prices moved higher overnight and maintained their gains after the Commerce Department reported that retail sales rose by 1.1% in September. The increase exceeded the 0.7% consensus estimate among economists and marked the largest increase in seven months. Additionally, retail sales in August were revised higher to 0.3%.

This morning’s move higher in gold prices – despite the positive retail sales data – provided further evidence that the gold continues to “act like a hybrid of a risk asset and a safe haven,” as analysts at UBS wrote in a note to clients earlier this week. While the gold price displayed its safe haven attributes for much of the summer months, since early September it has traded much more like a dollar-denominated commodity.

“This has made trading the gold very challenging, as while one can have a view on an event such as U.S. payrolls for example, deciphering how gold reacts has become a lot more difficult,” UBS contended. “While buyers are nimbly returning, it is no surprise that there is caution given the struggle for conviction.”

Looking ahead to later this morning, a possible catalyst for the gold price is the University of Michigan Consumer Sentiment report. Economists are forecasting a slight increase from last month’s 59.4 reading, to 60.0 in October, fueled in part by the recent rebound in U.S. equity markets. If the data comes in ahead of expectations, the gold price could face selling pressure as investors move into riskier asset classes. Alternatively, if the report disappoints, the gold price could surmount an attack on the $1,700 per ounce level.

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