XAU/USD – Gold Slide Continues, US GDP Beats Expectations

Gold is lower on Friday, trading at a spot price of $1216.58 an ounce in the North American session. In economic news, US Final GDP posted a gain 0f 1.4%, above the forecast of 1.0%.

US Final GDP for the fourth quarter beat expectations, supported by a climb in household spending, a key driver of economic growth. The fourth quarter gain of 1.4 percent was lower than the 2 percent gain in Q3, but beat the estimate of 1.0%. The economy grew at a pace of 2.0 percent in 2015, identical to the figure of 2014. Meanwhile, US durable reports in February pointed to a manufacturing sector which continues to struggle. Core Durable Goods Orders posted a decline of 1.0%, well short of the forecast of a 0.2% drop. This marked the indicator’s third decline in four months. Durable Goods Orders was even worse, with a reading of -2.8%, slightly above the estimate of -3.0%. This slowdown is reflective of weak global demand, which has had a strong negative impact on the manufacturing sectors of developed economies worldwide, including the US.

Gold dropped sharply on Thursday, losing 2.2 percent of its value. The metal has been under pressure all week over a flurry of hawkish statements from Federal Reserve policymakers concerning another rate hike. Last week’s policy statement appeared to rule out any imminent rate hikes, but since then a host of Fed members have publicly expressed support for a rate hike as early as April. On Monday, John Williams, president of the San Francisco Fed, said that the Fed could raise rates in April and June if economic conditions improve. His comments were echoed by Atlanta Fed Dennis Lockhart, who also said that an April rate move was a clear possibility. Lockhart noted that the US economy was holding up well, despite weak global conditions. Lockart said that the economy was close to full employment and the Fed’s target of 2 percent inflation was attainable. There was further support for rate hikes from two other Fed presidents, Patrick Harker and James Bullard. Harker said that given the strong economy, the Fed should consider raising interest rates as early as the April meeting, and added that he favored at least three rate hikes during the year. On Wednesday, Bullard said that with the US unemployment rate at very low levels, the Fed could be forced to raise rates sooner rather than later. Given these statements, traders should treat an April move by the Fed as a reasonable possibility, with US employment and inflation numbers having a huge say on the Fed’s decision. A rate hike would make the US dollar more attractive to investors, hurting other assets such as gold.

XAU/USD Fundamentals

Friday (March 25)

• 12:30 US Final GDP. Estimate 1.0%
• 12:30 US Final GDP Price Index. Estimate 0.9%

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Friday, March 25, 2016

XAU/USD March 25 at 10:00 DST

Open: 1222.01 Low: 1212.31 High: 1223.85 Close: 1216.58

XAU/USD Technical

• XAU/USD has been choppy in the Asian in European sessions
• There is resistance at 1232
• 1205 is providing support
• Current range: 1205 to 1232

Further levels in both directions:

• Below: 1205, 1191 and 1169
• Above: 1232, 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged. Long positions have a strong majority (59%), indicative of trader bias towards gold reversing directions and moving upwards.

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.