February gold is trading back down toward the 1225 mid-range level where we’ve spent the better portion of 4 months, driven mainly on the Chinese data this morning. China posted a clearly disappointing retail sales number for November of 8.1% compared to the guess of 8.8%. This is what is driving almost all commodities lower this morning. Among the data was also the Chinese industrial output number of 5.4% vs 5.9% that was expected.

Other key reasons gold is down this morning are the most obvious and historically important for driving gold one way or the other. The first, is a very strong US dollar that is making new highs. The second, is a tone that suggests a more hawkish US Fed at the upcoming meeting on December 19th. Gold is trading down roughly $10 this morning at 1239. After breaking out above 1256 just briefly on Monday. I think that gold is still going to be supported in this range, but a new catalyst is needed to get the gold bulls excited again. If the fed were to take a step back on a rate hike, it would likely be seen as a surprise and move gold well above recent highs. The trade is discounting a rate hike at a coin flip essentially, as compared to as high as 90% just a few months ago. Stock market volatility, and mixed economic data has the fed concerned that rate hikes too aggressively could derail the soaring US economy.

Gold Feb ’19 Daily Chart