Gold Dips, Markets Eye US Consumer Inflation Reports

Gold is subdued on Wednesday, continuing the downward trend which marked the Tuesday session. Gold is trading at a spot price of $1245.33 an ounce in the North American session. On the release front, US retail sales and PPI reports disappointed, with all three events missing their estimates. The EIA Crude inventories posted a surplus of 6.6 million, much higher than the estimate. On Thursday, we’ll get a look at US consumer inflation reports.

Key US releases disappointed on Wednesday. Core Retail Sales improved to 0.2%, but fell short of the forecast of 0.4%. Retail Sales was unexpectedly weak, posting a decline of 0.3%. This was short of the estimate of a 0.1% gain and marked a second straight drop for the indicator. Consumer spending represents the biggest part of the economy, so these figures could spell trouble at a time that the export sector remains soft due to weak global demand. PPI, a key gauge of inflation in the manufacturing sector, continues to struggle, posting a third decline in four months. The index dipped 0.1% in March, well off the estimate of a 0.3% gain. Will we see some relief from CPI on Thursday? The Federal Reserve, which has sent out a decidedly dovish message about the US economy, has greatly lowered expectations about a rate hike in April, and if CPI disappoints, the likelihood of a June move will decrease.

The Federal Reserve remains under the market microscope, as analysts try to forecast what the Fed has in mind regarding future rate hikes. Recent hawkish statements from several Fed members had raised expectations about a rate hike in April, but Fed chair Janet Yellen responded with a dovish assessment of the US economy, dampening such speculation. Last week, Yellen acknowledged that although domestic growth was steady, the US economy remained prone to risks due to turbulent conditions in the global economy. New York Federal Reserve president William Dudley reiterated Yellen’s message, saying that the Fed must approach future rate hikes with caution. As well, the Fed released the minutes of its March policy meeting last week, and the tone was more dovish than expected, although some members did express support for an April hike. The minutes also pointed to a split as to whether the recent pickup in inflation will continue. Higher inflation levels would increase the likelihood of a rate hike in June. Most analysts are expecting no more than two rate hikes in 2016, although stronger than expected economic data could change this forecast.

XAU/USD Fundamentals

Wednesday (April 13)

• 8:30 US Core Retail Sales. Estimate 0.4%. Actual 0.2%
• 8:30 US PPI. Estimate +0.3%. Actual -0.1%
• 8:30 US Retail Sales. Estimate +0.1%. Actual -0.3%
• 8:3o US Core PPI. Estimate +0.1%. Actual -0.1%
• 10:00 US Business Inventories. Estimate 0.1%. Actual -0.1%
• 10:30 US Crude Oil Inventories. Estimate 0.9M. Actual 6.6M
• 13:01 US 10-year Bond Auction
• 14:00 US Beige Book

Upcoming Key Events

Thursday (April 14)

• 8:30 US CPI. Estimate 0.2%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 270K

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Wednesday, April 13, 2016

XAU/USD April 13 at 12:05 DST

Open: 1254.15 Low: 1239.77 High: 1256.78 Close: 1245.33

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair posted losses in the European session and has been choppy in North American trade
• 1232 is providing support
• 1255 remains fluid and has switched to a resistance role
• Current range: 1255 to 1279

Further levels in both directions:

• Below: 1232, 1205 and 1191
• Above: 1255, 1279, 1303 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio has showed slight movement towards short positions on Wednesday. Long positions command a solid majority (56%), which is indicative of trader bias towards gold reversing directions and moving higher.

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.