XAU/USD – Gold Stabilizes, US Post Mixed Numbers

Gold is almost unchanged on Wednesday, after sustaining sharp losses in the Tuesday session. In North American trade, the metal is trading at a spot price of $1267.97 per ounce. On the release front, ADP Employment Change slipped to 154 thousand, short of the forecast of 166 thousand.  There was positive news from the services sector, as ISM Non-Manufacturing PMI jumped to 57.1, above the forecast of 53.1. On Thursday, the US will release Unemployment Claims, with the estimate standing at 255 thousand.

Gold remains under pressure, as the metal declined 3.3 percent on Tuesday. Gold prices have dropped 5.4 percent since September 28, mirroring the sharp spike in oil prices during this period. The base metal is currently trading at its lowest levels since the Brexit vote in late June, when gold prices surged following Britain’s surprise vote to leave the European Union. With the US releasing a host of key employment numbers on Thursday and Friday, we could see some strong movement from gold prices later this week.

The ADP payroll report was a disappointment on Wednesday, dropping to 154 thousand in September, its lowest gain since February 2014. With the odds of a December rate hike priced in at about 55%, Friday’s triple-release of US job numbers will be especially important. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge higher to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the market forecasts are accurate, gold prices could resume their downward slide.

The Fed remains divided over the timing of a rate hike, and this was underscored at the September meeting, when three of the ten FOMC members voted against the decision to hold rates at 0.25%, voting instead in favor of an immediate rate hike. On Tuesday, FOMC member Jeffrey Lacker, one of seven non-voting members, said that he would have voted in favor of a rate hike at the last meeting had he been able to vote. The strong dissent in the September rate decision has not helped the credibility of the Fed, which had promised a series of rate hikes in 2016, but has opted for the sidelines since its quarter-point hike last December. Continuing mixed messages from the Fed make it difficult for the markets to ascertain what the Fed has planned regarding monetary policy and whether it will press the rate trigger in December or wait until next year.

XAU/USD Fundamentals

Wednesday (October 5)

• 8:15 US ADP Nonfarm Employment Change. Estimate 166K. Actual 154K
• 8:30 US Trade Balance. Estimate -41.1B. Actual  -40.7B
• 9:45 US Final Services PMI. Estimate 51.9. Actual 52.3
• 10:00 US ISM Non-Manufacturing PMI. Estimate 53.1. Actual 57.1
• 10:00 US Factory Orders. Estimate -0.4%. Actual +0.2%
• 10:30 US Crude Oil Inventories. Estimate +1.1M. -3.0M

Upcoming Key Events 

Thursday (October 6)

• 8:30 US Unemployment Claims. Estimate 255K

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, October 5, 2016

XAU/USD October 5 at 13:40 EDT

Open: 1268.21 High: 1277.25 Low: 1262.08 Close: 1267.97

XAU/USD Technical

• XAU/USD showed little movement in the Asian and European sessions. The pair has posted slight losses in North American trade
• 1245 is providing support
• There is resistance at 1279
• Current range: 1245 to 1279

Further levels in both directions:

• Below: 1245, 1223 and 1199
• Above: 1279, 1307 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio shows long positions with a substantial majority (73%). This is indicative of trader bias towards XAU/USD reversing its downward movement 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.