Gold Little Changed after Positive US Employment Report

Gold has posted small losses on Wednesday, as the metal trades at a spot price of $1358.23 per ounce in the North American session. On the release front, ADP Nonfarm Payrolls improved to 179 thousand, beating the estimate. The ISM Non-Manufacturing PMI came in at 55.5 points, short of expectations. On Thursday, the US releases Unemployment Claims, with the estimate standing at 265 thousand.

Gold prices remain at high levels, as the soft US GDP report has weighed on the US dollar. Preliminary GDP for the second quarter disappointed, as the markets had expected a strong gain of 2.6%, while the economy responded with a much smaller gain of 1.2%. On Wednesday, US releases were a mixed bag. July employment numbers started off on the right foot, as ADP Nonfarm Payrolls improved to 179 thousand, beating the estimate of 171 thousand. However, the ISM Non-Manufacturing PMI disappointed, as the index dipped to 55.5 points, missing the estimate of 56.0 points. On Thursday, we’ll get a look at Unemployment Claims, followed by the all-important Nonfarm Payrolls on Thursday. Strong readings could renew speculation of a rate hike in September. Market sentiment has soured on the US dollar since last week’s GDP report, as the gain of 1.2% was well short of the forecast of a 2.6% gain.  The markets have circled September and December as the most likely dates for a rate hike, but if the Fed isn’t satisfied with the economy’s performance, it could delay any moves until 2017.

Interest rates are closely linked to gold movement, as the metal tends to rise when rates are lowered. This means that traders should be prepared for possible volatility on Thursday, when the Bank of England meets for a policy meeting. The BoE is widely expected to cut interest rates in order to cushion fallout from Brexit. The BoE surprised the markets in July when it maintained rates at 0.50%, but faces losing credibility if it stays on the sidelines again. The bank hasn’t lowered rates since 2009, so even though a rate cut has been priced in, such a dramatic move could shake up the markets and give gold prices a boost.

XAU/USD Fundamentals

Wednesday (August 3)

• 8:15 ADP Non-Farm Employment Change. Estimate 171K. Actual 179K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.0. Actual 55.5
• 9:45 US Final Services PMI. Estimate 51.0. Actual 51.4
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.0. Actual 55.5
• 10:30 US Crude Oil Inventories. Estimate -1.6M. Actual +1.4M

Thursday (August 4)

• 8:30 US Unemployment Claims. Estimate 265K

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, August 3, 2016

XAU/USD August 3 at 13:20 EDT

Open: 1363.07 High: 1366.51 Low: 1354.20 Close: 1358.23

XAU/USD Technical

• XAU/USD was flat in the Asian and European sessions. The pair has posted slight losses in the North American session
• 1361 is fluid and is currently a weak resistance line
• There is strong support at 1331
• Current range: 1331 to 1361

Further levels in both directions:

• Below: 1331, 1307 and 1279
• Above: 1361, 1388, 1416 and 1447

OANDA’s Open Positions Ratio

XAU/USD ratio is showing gains in short positions on Wednesday, continuing the trend we saw on Tuesday. Long positions have a strong majority (57%), indicative of trader bias towards XAU/USD 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.