Gold Pushes Higher as Consumer Spending, Housing Reports Miss Estimates

Gold has posted considerable gains in the Thursday session. In North American trade, spot gold is trading at $1317.83, up 0.69% on the day. In economic news, unemployment claims edged up to 236 thousand, just below the forecast of 237 thousand. Personal Spending came in at 0.3%, shy of the estimate of 0.4%. The news from the housing sector was also disappointing, as Pending Home Sales posted a sharp decline of 0.8%, well off the forecast of +0.4%. On Friday, we’ll get a look at key employment data. Average Hourly Earnings is expected to edge lower to 0.2%, and the markets are braced for Nonfarm Employment Change to drop to 180 thousand.

Gold prices have shot up 1.9% this week, despite a stellar showing from GDP in the second quarter. Preliminary GDP (second estimate) was revised to 3.0%, a marked improvement from the first estimate of 2.6%. Consumer confidence and spending remain strong and helped contribute to second quarter growth, which posted its strongest gain since the first quarter of 2015. However, solid consumer spending has failed to boost inflation, and wage growth remains weak. The markets will be looking closely at the July wage growth report, which is expected to show a weak gain of 0.2%. The lack of inflation could hamper the Federal Reserve’s plans to raise interest rates, with the likelihood of a rate hike in December standing at just 35%. On the employment front, ADP Nonfarm Payrolls jumped to 237 thousand, marking a 3-month high. The official Nonfarm Payrolls report will be released on Friday, and if this indicator also beats the forecast, it would be a strong indication that the economic momentum has continued into the third quarter.

Gold is considered a safe-haven asset, and often benefits when investors get jittery and lose their risk appetite. Such was the case this week, as renewed tensions between the US and North Korea early in the week propelled the metal above the symbolic $1300 level.  On Tuesday, North Korea fired a missile over Japanese territory, drawing sharp condemnations from Japan and the US, with President Trump declaring that “all options remain on the table”. Although, tensions have since eased somewhat, if North Korea decides to fire another missile towards Japan or the US military base on Guam, gold prices will likely move higher.

XAU/USD Fundamentals

Thursday (August 31)

• 7:30 US Challenger Job Cuts. Actual 5.1%
• 8:30 US Unemployment Claims. Estimate 237K. Actual 236K
• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
• 8:30 US Personal Spending. Estimate 0.4%. Actual 0.3%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.4%
• 9:45 US Chicago PMI. Estimate 58.7. Actual 58.9
• 10:00 US Pending Home Sales. Estimate +0.4%. Actual -0.8%
• 10:30 US Natural Gas Storage. Estimate 33B. Actual 30B

Upcoming Key Events

Friday (September 1)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 180K
• 8:30 US Unemployment Rate. Estimate 4.3%
• 10:00 US ISM Manufacturing PMI. Estimate 56.5
• 10:00 US Revised UoM Consumer Sentiment. Estimate 97.4

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, August 31, 2017

XAU/USD August 31 at 12:40 EST

Open: 1308.81 High: 1318.78 Low: 1297.88 Close: 1318.36

XAU/USD Technical

• XAU/USD edged lower in the Asian session but recovered in the European session. The pair has posted gains in North American trade
• 1307 was tested earlier in support
• 1337 is the next resistance line
• Current range: 1307 to 1337

Further levels in both directions:

• Below: 1307, 1285, 1260 and 1232
• Above: 1337, 1367 and 1392

OANDA’s Open Positions Ratio

XAU/USD ratio has reversed directions and is showing movement towards short positions. Currently, long positions and short positions are evenly split, (50%), indicative of a lack of trader bias as to what direction XAU/USD will take next. 

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