Gold Rally Continues on Market Disappointment with Fed, Weak Housing Report

Gold prices continue to move higher on Wednesday, as the base metal has posted daily gains for a sixth straight day. In the North American session, the gold is trading at $1251 per ounce, its highest level since the end of February. On the release front, housing and inflation data was a disappointment. Existing Home Sales dropped to 5.48 million, missing the forecast of 5.59 million. As well, the House Price Index fell to a flat 0.0%, short of the estimate of 0.4%. On Thursday, the US releases unemployment claims.

It’s been a strong run for gold, which has jumped 4.0 percent since the Fed’s dovish rate statement last week. With little in the way of key fundamentals this week, the markets are focusing on comments from FOMC members who will be speaking this week, including Fed Chair Janet Yellen on Thursday. On Monday, Chicago Fed President Charles Evans said he expects the Fed to raise rates two more times this year. This echoes the Fed’s dot point plot as well as last week’s rate statement. Although three rate hikes in 2017 would be no mean feat, the markets would like four hikes, given the strong performance of the US economy. The Fed’s cautious approach has disappointed the markets, and this negative sentiment has sent the US dollar sharply lower against gold. The CME Group has priced in a May hike at just 6% while a hike in June is currently priced in at 54%. Will this week’s Fed policymakers present a consistent message over rate policy? In the past, Fed policymakers have presented conflicting positions, and if the market senses that there are divisions within the Fed, the US dollar could lose more ground.

XAU/USD Fundamentals

Wednesday (March 22)

• 9:00 US HPI. Estimate 0.4%. Actual 0.0%
• 10:00 US Existing Home Sales. Estimate 5.59M. Actual 5.48M
• 10:30 US Crude Oil Inventories. Estimate 1.9M. Actual 5.0M

Upcoming Key Events

Thursday (March 23)

• 8:30 US Unemployment Claims. Estimate 240K
• 8:45 US Fed Chair Janet Yellen Speech

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, March 22, 2017

XAU/USD March 22 at 14:05 EST

Open: 1245.69 High: 1251.23 Low: 1243.93 Close: 1251.03

XAU/USD Technical

• XAU/USD was flat in the Asian and European sessions. The pair has edged higher in North American trade
• 1232 is providing support
• 1260 is the next resistance line
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199, 1174 and 1146
• Above: 1260, 1285 and 1307

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a majority (62%). This is indicative of trader bias towards XAU/USD continuing to climb higher.

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