Retail Sales to Put Downward Pressure on AUD

Gold prices in Australian dollars have had a small rise today, with the local currency under pressure after yet another disappointing retail sales report. The data, released by the ABS at 11.30 this morning, showed a decline in retail sales spending of 0.1% for the month, with annual growth coming in at just 2.1%, the weakest result since June 2013. If one factors in population growth, annual retail sales per capita are now declining, a testament to record low wage growth, record high private debt levels, and a savings rate that is negative once compulsory super is factored in.

This result is a prime example of the tepid economic environment Australia finds itself in, and will in turn put more pressure on the RBA to cut rates, something we are almost alone in continuing to forecast. That will boost Australian dollar gold prices, and likely gold demand from Australian investors, as lower rates will punish savers directly, whilst a lower AUD increases imported inflation. Gold is a natural alternative in such environments, with todays news reaffirming the role precious metals can play in a well diversified portfolio.