Gold Stabilizes After Friday Slide

Gold is almost unchanged in the Monday session, after strong losses on Friday. In North American trade, spot gold is trading at $1259.10, down 0.03% on the day. On the release front, there are no major events on the schedule. On Tuesday, the US releases JOLTS Jobs Openings, which is expected to edge lower to 5.66 million.

Gold prices have been on a roll, as the metal posted three consecutive winning weeks in July, climbing 4.9% during that time. However, that streak ended last week, as gold was down 0.09% on Friday, courtesy of a strong nonfarm payrolls report. The indicator came in at 209 thousand, easily beating the estimate of 182 thousand. The unemployment rate edged lower to 4.3%, but the positive news was dampened somewhat by wage growth, which remained unchanged at 0.3%. This underscores weak inflation levels, which has left investors unsure as to whether the Federal Reserve will raise rates one final time in 2017.

The Federal Reserve is sounding less sure about a final rate hike in 2017, and the markets remain skeptical, with the odds of a December move below 50%. Investors have now shifted their attention to the Fed’s balance sheet, which stands at $4.2 trillion. Fed policymakers have broadly hinted at reducing purchases of bonds and securities starting in September, but San Francisco Fed President John Williams was more forthcoming about the Fed’s plans, likely aimed at giving notice to the markets. In a speech on Wednesday, Williams said that the economy had “fully recovered” from the 2008 financial crisis and called on the Fed to start trimming the balance sheet “this fall”. Williams added that the process would be gradual and would take four years to reduce the balance sheet to a “reasonable size”.  Other FOMC members have also come out in favor of the Fed starting to wind up its portfolio this fall. A reduction in the Fed portfolio would likely push gold prices lower, with the Institute of International Finance estimating that a reduction of $200 billion in the balance sheet would be equivalent to three normal interest hikes. Gold prices move inversely to rate hikes, so as the Fed trims down its portfolio, the dollar could move higher against gold.

Monday (August 7)

• 13:25 US FOMC Member Neel Kashkari Speaks
• 15:00 US Consumer Credit. Estimate 15.6B

Tuesday (August 8)

• 10:00 US JOLTS Job Openings. Estimate 5.66M

*All release times are EDT

*Key events are in bold

XAU/USD for Monday, August 7, 2017

XAU/USD August 7 at 12:20 EST

Open: 1257.23 High: 1260.02 Low: 1255.76 Close: 1259.10

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair edged lower in the European session and has recovered these losses in North American trade
• 1232 is providing support
• 1260 is under pressure in resistance
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199 and 1170
• Above: 1260, 1285, 1307 and 1337

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight movement towards short positions. Currently, long positions have a majority (53%), indicative of XAU/USD reversing directions and moving higher.

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