XAU/USD – Gold Jumps on Soft Consumer Confidence, Fed Statement Looms

Gold has jumped above the $1200 level on Tuesday, posting gains of over 1 percent. In the North American session, the pair is trading at $1210.41. On the release front, CB Consumer Confidence dropped to 111.8, short of the forecast of 112.6. Wednesday promises to be a busy day. The US will release the ADP payrolls report and ISM Manufacturing PMI. As well, the Federal Reserve will set the benchmark interest rate and  release a rate statement.

On Friday, US Advance GDP came in at 1.9% for the fourth quarter, short of the forecast of 2.1%. Analysts had predicted that US economic growth would soften in the fourth quarter after an exceptionally strong Q3, which prodded the Fed to raise rates in December, for the first time in a year. Business investment and consumer spending remains solid and should continue into 2017. However, Trump’s protectionist rhetoric and actions, which saw tensions escalate with Mexico last week, could darken the bright picture for the US economy.

Donald Trump continues to stir controversy, after signing a host of executive orders last week which have been condemned both domestically and abroad. Trump has withdrawn from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement with Canada and Mexico. He has also ordered work to begin on a wall with Mexico and banned immigrants from seven Moslem countries. Trump’s unconventional and disjointed approach to international politics and trade could have major ramifications on global trade and could lead to financial instability in global markets, triggering volatility in the currency markets. Just a few days before being sworn in as president, Trump stated that the US dollar was “too strong”, blaming a weak Chinese currency. Predictably, the greenback lost ground after Trump’s remarks. It’s a safe bet that Trump’s offhand tweets and comments will continue to fuel market volatility.

Geopolitical and Trade Risks Dominate Market Moves

Fed Expected to Keep Rates on Hold Awaiting Trump Plan

XAU/USD Fundamentals

Tuesday (January 31)

• 8:30 US Employment Cost Index. Estimate 0.6%. Actual 0.5%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.0%. Actual 5.3%
• 9:45 US Chicago PMI. Estimate 55.1. Actual 50.3
• 10:00 US CB Consumer Confidence. Estimate 112.6. Actual 111.8

Upcoming Key Releases

Wednesday (February 1)

• 8:15 US ADP Nonfarm Employment Change. Estimate 165K
• 10:00 US ISM Manufacturing PMI. Estimate 55.0
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rates. Estimate <0.75%

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, January 31, 2017

XAU/USD January 31 at 13:00 EST

Open: 1196.76 High: 1215.41 Low: 1196.09 Close: 1210.41

XAU/USD Technical

• XAU/USD posted slight gains in the Asian session. In European trade, the pair posted slight losses but recovered. XAU/USD has posted stronger gains in the North American session
• 1199 has switched to a support role following gains by XAU/USD on Tuesday
• 1232 is the next resistance line
• Current range: 1199 to 1232

Further levels in both directions:

• Below: 1199, 1174, 1146 and 1130
• Above: 1232, 1260 and 1285

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Tuesday session. Long positions have a strong majority (71%), indicative of trader bias towards XAU/USD continuing to climb to higher levels.

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