Gold Drifting as US Markets Observe Memorial Day

After posting strong gains on Friday, gold is unchanged in the Monday session. In North American trade, spot gold is trading at $1266.79 an ounce. There are no US events on the schedule, as markets are closed for Memorial Day. On Tuesday, the key event is CB Consumer Spending.

The US economy slowed down in the first quarter, but there revised estimate for growth came in at 1.2%. This was considerably higher than the 0.7% gain which was reported in the first estimate in April. Although the revised figure was welcome news, GDP in Q1 was the lowest in a year, and well off the 2.1% gain in Q4. Business spending remains weak, and although consumer confidence remains at high levels, consumer spending has not kept up, as retail sales was softer than expected in April. The manufacturing sector has hit some turbulence, with Core Durable Goods Orders posting a decline of 0.4% in April, its third decline in four months. After a shaky first quarter for the US economy, there are no indications pointing to a rebound in the second quarter.

Will weaker growth and stubbornly low inflation cause the Fed to rethink a June rate increase? The markets don’t think so, as the odds of a 0.25% rate hike have increased to 84%, according to the CME Group. At the same time, the likelihood of a rate hike in the second half of 2017 are low. The odds for a September rate are just 26%, with the markets unclear on whether the Fed will make further moves this year if inflation remains below the Fed target. Even if soft first quarter data was a blip, the markets are concerned that President Trump, who is facing congressional investigations over his connections with the Russian government, could be seriously weakened and may not be able to pass his pro-business agenda through Congress.

XAU/USD Fundamentals

Monday (May 29)

• There are no US events

Tuesday (May 30)

• 8:30 US Core PCE Price Index. Estimate 0.1%
• 8:30 US Personal Spending. Estimate 0.4%
• 10:00 US CB Consumer Spending. Estimate 120.1

*All release times are EDT

*Key events are in bold

XAU/USD for Monday, May 29, 2017

XAU/USD May 29 at 12:50 EST

Open: 1266.93 High: 1269.27 Low: 1265.12 Close: 1266.79

XAU/USD Technical

• XAU/USD has showed little movement in the Monday session
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1232, 1199 and 1175
• Above: 1285, 1307 and 1337

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a strong majority (64%), indicative of XAU/USD breaking out and moving to higher levels. 

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