Gold Slides, US Markets Take Holiday

Gold is down sharply on Monday, trading at $1207.40 an ounce in the North American session. There are no US events on the calendar, as US markets are closed for a holiday.

It was another excellent week for gold, as the base metal surged 5.6 percent. Gold climbed as high as $1260 late last week, its highest levels since last February. It’s been a superb start to the year for gold, as market turmoil as spooked investors, who have responded by fleeing risk and snapping up safe-haven assets like gold. Weak oil prices and the China slowdown have led to financial turmoil and stock markets around the world have registered sharp drops. Developed economies have been hit hard, hampered by low inflation and weak global demand for their products. This economic turbulence which has characterized the early part of 2016 is been a boon for gold, and with these economic conditions likely to continue for some time, gold prices could continue to climb.

Federal Reserve Chair Janet Yellen testified before Congress last week, and her cautious remarks were quite a contrast with the upbeat statement that the Fed released in December. At that time, the Fed raised rates by 0.25%, the first upward move in almost a decade, and hinted that the hot US economy would likely require a series of rate hikes in 2016. Fast forward to February, and Yellen was much more circumspect than just a few months ago. In last week’s testimony, Yellen entertained the possibility (albeit a remote one) of negative interest rates. The Fed has ruled out making such a move in the past, and this is unlikely to change. Still, it remains a relevant scenario, with the Bank of Japan recently joining the ECB in implementing negative rates. Yellen also noted that inflation rates have remained very low due to the strong US dollar and weak oil prices. Given the current economic situation, many experts expect no more than two rate hikes this year, perhaps in June and December. At the same time, any improvement in key US numbers will heat up speculation about a possible March hike, and the markets and the Federal Reserve will be closely monitoring upcoming employment and inflation numbers.

XAU/USD Fundamentals

Monday (Feb. 15)

• There are no US events on the calendar

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Monday, February 15, 2016

XAU/USD February 15 at 12:00 EST

Open: 1234.03 Low: 1202.80 High: 1235.09 Close: 1207.40

XAU/USD Technical

• XAU/USD posted sharp losses in the Asian session. The pair has been flat in the European and North American sessions.
• 1205 is a weak support line
• There is resistance at 1232
• Current range: 1205 to 1232

Further levels in both directions:

• Below: 1205, 1191, 1175 and 1151
• Above: 1232, 1255 and 1279

OANDA’s Open Positions Ratio

XAU/USD ratio is showing a majority for long positions (57%), indicative of trader bias towards the pair reversing directions and moving to higher levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.