Gold Slightly Higher, Markets Eye CPI Report

Gold has posted slight gains on Thursday, as the metal trades at $1217.44 an ounce in the North American session. On the release front, US indicators were mixed. The Philly Fed Manufacturing Index came in at -2.8 points, close to the estimate. Unemployment Claims dropped to 262 thousand, beating expectations. Crude Oil Inventories posted a gain of 2.1 million, short of the forecast. On Friday, we’ll get a look at the Consumer Price Index, the primary gauge of consumer inflation.

Gold prices remain strong, and surged to a high of $1260 late last week, its highest level since February 2015. Market turmoil across the globe has put a worried frown on the faces of investors, many who have responded by fleeing risk and snapping up safe-haven assets like gold. The collapse of oil prices and the China slowdown have hurt the economies of developed countries, which are struggling with low inflation and weak global demand for oil and other exports. This economic turbulence which has characterized 2016 has been a boon for gold, and with these economic conditions likely to continue for some time, gold prices could make a push towards the $1300 level, which was last reached in January 2015.

On Wednesday, the Federal Reserve released the minutes of its January policy meeting. At that meeting, the Fed held rates at 0.25%, after raising rates in December for the first time in almost 10 years. The minutes reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard opined that there was room to delay any rate moves, given global financial turmoil and weak US inflation. Still, a growing number of market players are skeptical that the Fed will make any moves before next year. Back in the heady days of December, the Fed hinted at a series of rate hikes during 2016, but the turmoil in the financial markets and the downturn in the US economy in 2016 has quickly dampened expectations of a rate move.

XAU/USD Fundamentals

Thursday (Feb. 18)

• 8:30 US Philly Fed Manufacturing Index. Estimate -2.9 points. Actual -2.8 points
• 8:30 US Unemployment Claims. Estimate 275K. Actual 262K
• 10:00 US Mortgage Delinquencies. Actual 4.77%
• 10:00 US CB Leading Index. Estimate -0.1%. Actual -0.2%
• 10:30 US Natural Gas Storage. Estimate -154B. Actual -158B
• 11:00 US Crude Oil Inventories. Estimate 3.2M. Actual 2.1M

Upcoming Key Events

Friday (Feb. 19)

• 8:30 US CPI. Estimate -0.1%
• 8:30 US Core CPI. Estimate +0.2%

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, February 18, 2016

XAU/USD February 18 at 11:50 EST

Open: 1206.92 Low: 1200.71 High: 1219.44 Close: 1217.44

XAU/USD Technical

• XAU/USD was flat in the European and Asian sessions. The pair has posted slight gains in North American trade.
• 1205 was tested in support earlier in the day and remains a weak line
• There is resistance at 1232
• Current range: 1205 to 1232

Further levels in both directions:

• Below: 1205, 1191, 1175 and 1151
• Above: 1232, 1255 and 1279

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight movement towards long positions, which retain a strong majority (65%). This is indicative of trader bias towards the pair continuing to post gains.

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.