Key events to affect XAU/USD prices (Sep 16 - Sep 22)

Hello, fellow traders!

This week's economic calendar is full of central bank decisions, inflation reports, and retail sales data. The major event to stir up the Gold market - the Fed's interest rate decision and subsequent press conference - will take place on Wednesday.

Here’s a snapshot of all the high-priority economic events for September 16 - 22.

Let's dive into the specifics:

Tuesday, September 17

• Germany’s ZEW Economic Sentiment Index: measures confidence in the economy—whether things will improve, stay the same, or get worse. It’s based on a survey of financial experts who are asked about their views on how they think the economy will perform over the next six months.

  • Why it matters for Gold: Germany is Europe’s largest economy, so its economic health has a big impact on global markets. When the index shows high optimism, it often correlates with stronger equity markets and a preference for riskier assets. In such cases, Gold, being a safe-haven asset, tends to lose appeal, and XAU/USD can decline as investors shift funds into higher-yielding assets.

    However, things aren’t so clearcut. The ZEW Index also directly influences the value of the Euro. A positive reading can also strengthens the EUR, possibly leading to future tightening by the European Central Bank (ECB). A stronger EUR can pressure the US dollar lower, which often results in higher XAU/USD prices due to the inverse correlation between Gold and the dollar.

    If the Index is low (a negative reading), it indicates that experts expect the economy to struggle. This can lead to more demand for Gold as a safe haven, especially if the outlook makes investors nervous about the broader European economy. However, it can also lead to the weaker EUR and stronger USD, which may push gold prices lower in XAU/USD terms.

• Canada's Inflation Rate YoY: measures the percentage change in the prices of goods and services over a 12-month period. It’s one of the most critical indicators of economic health, as it reflects the purchasing power of the Canadian dollar and the cost of living in the country. Central banks, such as the Bank of Canada (BoC), closely monitor this data to set monetary policy, particularly interest rates.

  • Why it matters for Gold: Canada's inflation rate influences XAU/USD by affecting global currency dynamics, central bank policies, and Gold's role as a hedge against rising prices.

    If Canada’s YoY inflation consistently comes in high, particularly above the BoC’s target range (1%-3%), it raises the expectation for aggressive interest rate hikes. This could cause short-term pressure on Gold as the USD strengthens.

    On the flip side, if inflation is persistently high and outpaces rate hikes, it could trigger fears of uncontrolled inflation or economic stagnation. In such scenarios, demand for Gold as an inflation hedge typically increases, pushing XAU/USD higher. This is particularly relevant if the BoC's actions are perceived as insufficient to curb inflation, which could weaken confidence in fiat currencies.

    Canada’s inflation rate can also indirectly affect the US dollar, which is central to XAU/USD. A sharp rise in Canadian inflation, leading to aggressive BoC tightening, could cause shifts in global capital flows, influencing USD strength. A stronger USD would typically depress Gold prices, but any signs of inflationary spillover from Canada into the US economy could counteract that effect, driving Gold demand.

• The U.S. Retail Sales MoM: measures the change in the total value of sales at the retail level from one month to the next. It's a key indicator of consumer spending, which is a significant component of the US economy, accounting for about 70% of GDP.

  • Why it matters for Gold: If US retail sales rise more than expected, it indicates robust consumer spending. This tends to boost investor confidence and leads to increased demand for riskier assets like stocks, while decreasing demand for safe-haven assets like Gold.

    Strong retail sales data typically strengthens the USD because it