XAU/USD – Gold Steady at $1200 as US Manufacturing, Job Data Impresses

Gold prices are almost unchanged on Thursday, as the metal has remained close to the $1200 level. In the North American session, the spot price for one ounce is $1200.24. On the release front, the US wrapped up the week with strong numbers, as manufacturing and employment reports easily beat expectations. Friday is Inauguration Day in the US, and the markets will be closely monitoring President-elect Trump’s inaugural address to the American nation. There are no US economic events on Friday.

US data was sharp on Thursday. The Fed Philly Manufacturing Index improved to 23.6, crushing the forecast of 16.3. This marked the highest reading since November 2014. On the job front, Unemployment Claims dropped to 234 thousand, well below the forecast of 252 thousand. This marked the fourth straight week that jobless claims have come in below the forecast. Unemployment Claims remain close to levels not seen since the 1970s, as the US labor market remains close to capacity. On Wednesday, CPI edged up to 0.3%, while Core CPI remained unchanged at 0.2%. Both indicators matched the forecasts. Inflation levels are close to the Federal Reserve’s target of two percent, which means that policymakers will likely stick to their plan of gradual, modest rate hikes in 2017. However, the Fed is not expected to raise rates at its next meeting on February 1, so soon after raising rates in December for the first time in 12 months.

As Donald Trump is about to be sworn in as president, there is a feeling of unease in the air, despite a robust US economy. Trump’s upset election victory in November was warmly received by the markets, as the US stock market and the US dollar have climbed higher. However, confidence and hope are starting to give way to confusion and uncertainty, as Trump has failed to outline any specifics on his economic policies, while continuing to tangle with the media and fire off controversial Twitter messages. Trump’s comments earlier this week about the US dollar helped send the currency lower. In an interview with the Wall Street Journal on Monday, Trump complained that the currency was “too strong”. These sentiments were echoed on Tuesday by Trump advisor Anthony Scaramucci. Speaking at the World Economic Forum in Davos, Scaramucci warned that “we must be careful of a rising dollar.” Trump broke with the unwritten rule that US presidents refraining from commenting on the US dollar, and his comments could be a taste of more to come, as Trump is unlikely to veer from his habit of making controversial comments that could affect market movement.

Is the Gold Rally Over?

XAU/USD Fundamentals

Thursday (January 19)

• 8:30 US Building Permits. Estimate 1.22M. Actual 1.21M
• 8:30 US Philly Fed Manufacturing Index. Estimate 16.3. Actual 23.6
• 8:30 US Unemployment Claims. Estimate 252K. Actual 234K
• 8:30 US Housing Starts. Estimate 1.19M. Actual 1.23M
• 10:30 US Natural Gas Storage. Estimate -235B. Actual -243B
• 11:00 US Crude Oil Inventories. Estimate 0.1M. Actual 2.3M
• 20:00 US Fed Chair Yellen Speech

Upcoming Key Events

Friday (January 20)

• Tentative – President Trump Speech

XAU/USD for Thursday, January 19, 2017

XAU/USD January 19 at 13:10 EST

Open: 1202.88 High: 1205.92 Low: 1195.90 Close: 1200.21

XAU/USD Technical

• XAU/USD has been marked by choppy trading in the Thursday session
• 1199 is fluid. Currently it is a weak support line which could see further action in the North American session
• 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 remains unchanged this week. Currently, long positions command a strong majority (71%). This is indicative of trader bias towards XAU/USD breaking out and climbing to higher levels.

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