XAU/USD – Gold Pauses After Strong Gains to End Week

Gold is almost unchanged at the start of the week. In Monday’s North American session, spot gold is trading at $1256.01, up 0.07% on the day. On the release front, Existing Home Sales dropped to 5.52 million, missing the estimate of 5.59 million. On Tuesday, the US releases CB Consumer Confidence.

Gold continues to impress, gaining 1.7% last week. The metal is currently trading at its highest level since mid-June, as political turmoil in Washington has led to investors snapping up gold, a traditional safe-haven asset. Investors are increasingly concerned over Donald Trump, whose brash behavior and unconventional style has not been a good fit for the highest office in the land.  Trump had another bad week, as his flagship healthcare bill, which aims to replace Obamacare, stalled in the Senate after two Republican senators said they would not support the bill. Trump has failed to pass any significant legislation so far in his term, and investors are becoming more skeptical as to whether Trump will have any more success with his tax reform and fiscal spending plans. With the Democrats forming a rock-solid wall of opposition, dissension among Republican lawmakers, many of whom are uneasy about Trump, could doom attempts by the White House to get bills through Congress. There was more bad news as Robert Mueller, the special counsel who is investigating alleged collusion between Trump and Russian officials during the US election, said he would review business transactions involving Trump as well as his associates. Trump has said that Mueller’s scope is limited to Russia, so the stage could be set for a Nixon-type showdown between the president and the special counsel investigating wrongdoing by the president.

Aside from growing political risk in the US, gold prices rose last week after the European and Japanese central banks announced that they would continue their accommodative monetary policy. As well, the ECB and BoJ maintained the current policy of ultra-low interest rates, at 0.00% and 0.10% respectively. With the economies in the eurozone and Japan both showing improvement, there has been pressure on policymakers to reduce stimulus. However, inflation levels in the eurozone and Japan are well below the target of 2%, and the banks have reiterated that they will not taper asset-purchases until inflation levels move higher. The ECB is expected to revisit its monetary stance at its September meeting, and if policymakers decide to tighten monetary policy, gold prices could head lower.

IMF Sees U.S. Fading as Global Growth Engine

USD/XAU Fundamentals

Monday (July 24)

• 9:45 US Flash Manufacturing PMI. Estimate 52.3. Actual  53.2
• 9:45 US Flash Services PMI. Estimate 54.3. Actual 54.2
• 10:00 US Existing Home Sales. Estimate 5.59M. Actual 5.52M

Tuesday (July 25)

• 10:00 US CB Consumer Confidence. Estimate 116.2

*All release times are EDT

*Key events are in bold

XAU/USD for Monday, July 24, 2017

XAU/USD July 24 at 12:15 EST

Open: 1244.99 High: 1258.86 Low: 1252.01 Close: 1256.01

XAU/USD Technical

• XAU/USD ticked higher in the Asian session. The pair posted slight gains in the European session and continues to move upwards in North American trade
• 1232 is providing support
• 1260 is a weak resistance line
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199, 1170 and 1146
• Above: 1260, 1285 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio showed gains in short positions, following strong gains by XAU/USD on Friday. Currently, long positions have a majority (68%), indicative of XAU/USD breaking out and moving higher.

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