Gold Ticks Lower, Yellen Mum on Rate Move

Gold continues to have a quiet week, as the pair trades at $1242.98 in Tuesday’s North American session. In economic news, there are no major US releases on the schedule. US employment indicators continue to sag, as Revised Nonfarm Productivity posted a decline of 0.6%, matching the forecast.

Fed Chair Janet Yellen delivered a closely-watched speech on Monday, but the markets were disappointed with her lack of specifics. Speaking at the World Affairs Council in Philadelphia, Yellen said she remained optimistic about the US economy and hinted that the Fed would raise interest rates, but crucially, she gave no indication as to when that might occur. This omission was in sharp contrast to her remarks just over a week ago, when she declared that a hike would likely be appropriate “in the coming months”. Yellen was cautious in her tone on Monday, saying “[i]f incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective as I expect, further gradual increases in the Federal Funds Rate are likely to be appropriate”.  Yellen played down the dismal Nonfarm Payroll report, saying that the markets shouldn’t attach too much significance to one soft report. The markets had lowered expectations for a June rate hike, and Yellen’s speech has all but priced out a June move. However, a rate increase in July or September remain on the table, and any decision by the Fed to raise or maintain rates will be data-dependent, particularly inflation and employment data.

US employment numbers continue to raise concerns. On Monday, the Labor Market Conditions Index dropped 4.9 points, marking a fourth consecutive decline. This was followed by Revised Nonfarm Productivity, which dropped 0.6%. These soft figures were not a major surprise, coming on the heels of a dismal Nonfarm Payrolls report on Friday. This event is one of the most important indicators, and a dismal April report of just 38 thousand has stunned the markets. The weak figure marked the smallest increase in payrolls since August 2010. The estimate stood at 159 thousand, which was almost identical to the previous release. The US dollar took a beating on the currency markets, and gold also jumped on the bandwagon, surging 2.9% in the North American session. Gold had been sliding since mid-May, and Friday’s surge has restored some luster to the metal.

XAU/USD Fundamentals

Tuesday (June 7)

• 8:30 US Revised Nonfarm Productivity. Estimate -0.6%. Actual -0.6%
• 8:30 US Revised Unit Labor Costs. Estimate 4.0%. Actual 4.5%
• 10:00 US IBC/TIPP Economic Optimism. Estimate 49.1. Estimate 48.2
• 15:00 US Consumer Credit. Estimate 19.1B

Upcoming Key Events

Wednesday (June 8)

• 10:00 US JOLTS Job Openings. Estimate 5.69M

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, June 7, 2016

XAU/USD June 7 at 13:10 EDT

Open: 1244.91 Low: 1234.78 High: 1246.59 Close: 1242.80

XAU/USD Technical

• XAU/USD has shown limited movement in the Tuesday session
• 1232 is providing support
• There is resistance at 1255
• Current range: 1232 to 1255

Further levels in both directions:

• Below: 1232, 1207, 1191 and 1164
• Above: 1255 and 1279 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio is showing gains in short positions on Tuesday. Long positions maintain a strong majority (64%), indicative of trader bias towards XAU/USD breaking out 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.