XAU/USD – Gold Hits 2-Week High as Housing Starts Sinks

Gold has posted slight gains on Wednesday, continuing the upward trend we’ve seen all week. In the North American session, the metal is trading at a spot price of $1268.90 per ounce. On the release front, Building Permits jumped to 1.23 million, beating the forecast of 1.17 million. However, Housing Starts slipped to 1.05 million, well short of the forecast of 1.18 million. Crude Oil Inventories surprised the markets with a sharp drawdown of 5.2 million, compared to an estimate of a 2.2 million surplus. On Thursday, there are two major releases – the Philly Fed Manufacturing Index and unemployment claims.

Gold prices continue to move higher this week, as the metal has gained 1.2 percent. Gold has bounced back to a 2-week high, but is well below the October high of $1319. On Wednesday, US construction numbers sent mixed signals. Building Permits impressed with a reading of 1.23 million, the highest monthly reading in 2016. The news was not as good from Housing Starts, which dropped sharply to 1.05 million in September, compared to 1.14 million a month earlier. This marked the weakest reading since May 2015. The plunge in residential construction may weigh on third quarter GDP, which will be released in late November.

On Tuesday, US consumer inflation numbers were mixed. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 64 percent. Meanwhile, US consumer spending impressed in September. Retail sales gained 0.5%, while core retail sales jumped 0.6%, as both key indicators rebounded from declines in August. PPI was steady at 0.3%, but the UoM Consumer Sentiment Index disappointed, dropping to 87.9 points and missing expectations. This marked the weakest reading since September 2015.

XAU/USD Fundamentals

Wednesday (October 19)

• 8:30 Building Permits. Estimate 1.17M. Actual 1.23M
• 8:30 Housing Starts. Estimate 1.18M. Actual 1.05M
• 10:30 Crude Oil Inventories. Estimate 2.2M. Actual -5.2M
• 14:00 Beige Book
• 19:45 FOMC Member William Dudley Speaks

Upcoming Key Events

Thursday (October 20)

• 8:30 Philly Fed Manufacturing Index. Estimate 5.2 points
• 8:30 Unemployment Claims. Estimate 251K

*All release times are EDT

*Key events are in bold

XAU/USD for Wednesday, October 19, 2016

XAU/USD October 19 at 10:20 EDT

Open: 1263.66 High: 1271.31 Low: 1260.29 Close: 1268.90

XAU/USD Technical

• XAU/USD showed small losses in the Asian session. The pair reversed directions and posted considerable gains in the European session. In North American trade, XAU/USD is showing limited movement
• 1245 is providing support
• There is resistance at 1279
• Current range: 1245 to 1279

Further levels in both directions:

• Below: 1245, 1223 and 1199
• Above: 1279, 1307 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Thursday session. Currently, long positions command a substantial majority (78%). This is indicative of trader bias towards XAU/USD continuing to move upwards.

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.