XAU/USD – Gold Improves on Weak US Consumer Confidence

Gold has posted gains on Tuesday, reversing the losses sustained a day earlier. In the North American session, the pair is trading at $1225.15 an ounce. On the release front, US key events were a mix. CB Consumer Confidence slid to 92.2 points, well short of the forecast. Existing Home Sales remained steady at 5.47 million and beat expectations. We’ll get a look at US Crude Inventories on Wednesday.

Gold prices have surged higher in the first two months of 2016, posting superb gains of about 16%. The commodity is a traditional safe-haven, and the ongoing market turmoil affecting world markets has prodded nervous investors to flee risk and snap 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 has been a boon for gold, and with these economic conditions likely to continue for some time, gold could continue to register strong gains.

With the US economy slowing down in 2016, what does the Federal Reserve have in mind? The Fed sent out a cautious message in last week’s policy minutes, which 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 will be looking at other options if US rates do not move higher. Fed policymakers appear divided on the Fed’s upcoming strategy. Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard argued that there was room to delay any rate moves, given global financial turmoil and weak US inflation. Many market players are skeptical that the Fed will make any moves before next year. In 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 early 2016 have left the timing of another hike in doubt.

XAU/USD Fundamentals

Tuesday (Feb. 23)

• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.8%. Actual 5.7%
• 10:00 US CB Consumer Confidence. Estimate 97.4 points. Actual 92.2 points
• 10:00 US Existing Home Sales. Estimate 5.37M. Actual 5.47M
• 10:00 US Richmond Manufacturing Index. Estimate 2 points. Actual -4 points
• 20:30 US FOMC Stanley Fischer Speaks

Wednesday (Feb. 24)

• 10:00 US Existing Home Sales. Estimate 522K

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, February 23, 2016

XAU/USD February 23 at 11:35 EST

Open: 1208.81  Low: 1207.17 High: 1227.53 Close: 1224.64

XAU/USD Technical

• XAU/USD posted gains in the Asian session. The pair leveled off in the European session, but has resumed moving upwards in North American trade.
• 1205 is providing support
• 1232 has weakened in resistance as the pair trades at higher levels
• 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 unchanged on Tuesday. Long positions still retain a strong majority (60%). This is indicative of trader bias towards gold continuing its current movement and climbing 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.