Gold Edges Lower at Start of Week, Construction Reports Next

Gold has edged lower on Monday, as the metal trades at a  spot price of $1327.87 per ounce. In the US, the markets are looking for cues, as there are no major events on the schedule. NAHB Housing Market Index showed little change, posting a reading of 59 points. TIC Long-Term Purchases will be published later in the day. On Tuesday, we’ll get a look at construction indicators, with the release of Housing Starts and Building Permits.

Gold posted losses late last week, as the BoE surprised the markets by staying on the sidelines and opting not to lower interest rates. The markets had widely expected a quarter point cut from the BoE, which would have marked the first rate cut since July 2009. BoE Mark Carney had strongly hinted at the move when he recently stated that economic conditions had deteriorated and the BoE would need to lower rates this summer. With Carney passing on a move last week, that means there is a strong chance that the BoE will lower rates at its next policy meeting on August 4. Central banks prefer not to reveal their cards, but another balk by Carney next month would hurt the credibility of the BoE, so it’s likely that we’ll see a move. On Friday, BOE chief economist Andrew Haldane spoke in Wales, stating that the central bank needed to act “promptly as well as muscularly” in order to cushion the financial blow from Brexit. This appears to be a call for a comprehensive response, not just a quarter-point rate cut.  BoE Governor Mark Carney may not have asked for the job, but there are increasing expectations that the central bank will have to take significant steps, such as lowering interest rates, in order to help cushion the economy from the Brexit fallout.

US consumer indicators were on center stage on Friday, and the numbers were a mixed bag. Consumer inflation reports posted small gains of 0.2%, as inflation levels remain soft. There was better news on the consumer spending front, as Core Retail Sales posted a strong gain of 0.7%, beating the estimate. The UoM Consumer Sentiment report dipped below the 90-point level for the first time in three months, missing expectations. The Federal Reserve is unlikely to raise rates before September at the earliest, unless there is some strong improvement in economic data, particularly inflation and wage growth, which remain at low levels.

XAU/USD Fundamentals

Monday (July 18)

• 10:00 US NAHB Housing Market Index. Estimate 60 points. Actual 59 points
• 16:00 US TIC Long-Term Purchases. Estimate 31.6B

Upcoming Key Releases

Tuesday (July 19)

• 8:30 US Building Permits. Estimate 1.15M

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, July 18, 2016

XAU/USD July 18 at 12:00 EDT

Open: 1345.63 High: 1347.20 Low: 1320.23 Close: 1327.87

XAU/USD Technical

• XAU/USD posted slight losses in the Asian session. The pair was flat in the European session. The pair has posted slight gains in North American trade
• 1307 is providing support
• 1331 was tested earlier in resistance and could break during the North American session
• Current range: 1307 to 1331

Further levels in both directions:

• Below: 1307, 1279 and 1255
• Above: 1331, 1361, 1388 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement, consistent with the lack of significant movement from XAU/USD. Currently, long positions command a majority (64%), indicative of trader bias towards XAU/USD 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.