Gold Drops to $1060, US Jobless Claims Matches Forecast

Gold has posted slight losses on Thursday, as the base metal trades at $1063.67 per ounce at the start of the North American session. In economic news, economic events are back on center stage after the Federal Reserve raised interest rates by 0.25%. Unemployment Claims dropped to 271 thousand, while the Philly Fed Manufacturing Index looked awful, with a reading of -5.9 points.

In an historic move, although one that was widely expected, the US Federal Reserve raised interest rates by 0.25% at its policy meeting on Wednesday. This marked the first rate move upwards since June of 2006. The Fed had been sending a steady of stream of hints that it was intending to tighten monetary policy since the last policy meeting in late October. This gave the markets ample time to price in a rate hike, and the currency markets did not show much reaction to the Fed rate hike. The slight tightening move by the Federal Reserve is expected to have limited economic impact, but the psychological aspect cannot be overestimated, as the Fed has given the US economy a critical vote of confidence, and has signaled that additional rates are likely over the course of 2016. The carefully-crafted Fed strategy, which made sure that the markets were well-aware that a December hike was a likely scenario, contrasts sharply with the bungled approach of the ECB, which failed to communicate properly with the markets, which led to complete shock in the markets when the ECB failed to take any significant monetary steps at its December policy meeting, resulting in a sharp ascent by the euro.

There was positive employment news out of the US on Thursday, as Unemployment Claims fell to 271 thousand last week, down from 282 thousand. The US labor market has improved nicely, as the economy is close to full employment, with jobless claims and the unemployment rate at low levels. This is a major reason that the Federal Reserve felt comfortable tightening monetary policy and raising interest rates at the present time. Meanwhile, the US manufacturing sector continues to struggle, as the Philly Fed Manufacturing Index came in at -5.9 points, its third decline in four months.

XAU/USD Fundamentals

Thursday (Dec. 17)

• 13:30 US Philly Fed Manufacturing Index. Estimate 2.1 points. Actual -5.9 points
• 13:30 US Unemployment Claims. Estimate 271K. Actual 271K
• 13:30 US Current Account. Estimate -123B. Actual -124B
• 15:00 US CB Leading Index. Estimate 0.2%
• 15:30 US Natural Gas Storage. Estimate -58B

*Key releases are highlighted in bold

*All release times are GMT

XAU/USD for Thursday, December 17, 2015

XAU/USD December 17 at 14:00 GMT

XAU/USD 1063.67 H: 1073 L: 1063

XAU/USD Technical

• XAU/USD was level in the Asian session and has posted losses in European trade.
•  1080 is providing resistance
• 1043 is the next support level
• Current range: 1043 to 1080

Further levels in both directions:

• Below: 1043, 1024 and 980
• Above: 1080, 1098, 1134 and 1151

OANDA’s Open Positions Ratio

XAU/USD ratio continues to show little movement. Long positions continue to command a solid majority (71%), indicative of strong trader bias towards gold prices reversing directions and moving to higher levels.

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.