Gold Moves Higher as US Consumer Numbers Slip, Rate Move Next?

Gold has posted considerable gains in the Wednesday session, as XAU/USD is up 0.72%. In North American trade, spot gold is trading at $1275.77 per ounce. Consumer data was soft, as retail sales and CPI posted declines of 0.3% and 0.1%, respectively. Later in the day, the Federal Reserve announces its benchmark rate, which is expected to increase by 25 basis points to 1.25 percent. On Thursday, we’ll get a look at the weekly unemployment claims report, with an estimate of 241 thousand.

All eyes are on the Federal Reserve, which  will release a rate statement later on Wednesday. The Fed is widely expected to raise interest rates by a quarter point to 1.25%, but there’s still plenty of anticipation, as analysts will be focusing on the language in the rate statement and as well as the Fed’s economic projections. Analysts are expecting a “dovish hike”, meaning that together with the rate increase, the Fed rate statement will be cautious in tone, and dovish regarding additional rate hikes. A dovish message could pour cold water on a rate hike in September and boost gold prices. Earlier in the year, three rate hikes in 2017 seemed almost a given, but currently, the odds of a September move are just 28%. There are two key items which could affect gold prices. First, the Fed Economic Projections will detail forecasts of inflation, growth and unemployment, and most importantly, the rate hike path. With the US economy performing better in the second quarter, there’s a strong likelihood that the Fed will not moderate its rate hike projections,which is good news for the dollar. Secondly, the markets will be looking for details regarding its plan to lower the $4.2 trillion balance sheet. If the Fed outlines a plan to reduce its holding in H2, the dollar could respond positively. Another variable is the political paralysis which has engulfed Washington. With the  Trump administration spending most of its energy on damage control, little progress is being made with regard to Trump’s agenda of tax reform and major spending on infrastructure. The markets are becoming more skeptical about Trump’s ability to work with Congress, and if this sentiment is shared by the Fed, it is likely to sound dovish regarding rate hikes in September or December.

XAU/USD Fundamentals

Wednesday (June 14)

• 8:30 US CPI. Estimate +0.2%. Actual -0.1%
• 8:30 US Core CPI. Estimate +0.2%. Actual +0.1%
• 8:30 US Core Retail Sales. Estimate +0.2%. Actual -0.3%
• 8:30 US Retail Sales. Estimate +0.1%. Actual -0.3%
• 10:00 US Business Inventories. Estimate -0.1%. Actual -0.2% 
• 10:30 US Crude Oil Inventories. Estimate -2.3M. Actual -1.7M
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.25%
• 14:30 US FOMC Press Conference

Thursday (June 15)

• 8:30 US Unemployment Claims. Estimate 241K

*All release times are EDT

*Key events are in bold

XAU/USD for Wednesday, June 14, 2017

XAU/USD June 14 at 12:30 EST

Open: 1266.51 High: 1279.56 Low: 1264.90 Close: 1275.77

XAU/USD Technical

• XAU/USD showed little movement in the Asian and European sessions. The pair posted considerable gains in North American trade
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1232, and 1199
• Above: 1285, 1307, 1337  and 1367

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight gains in the Wednesday session. Currently, long positions have a majority (59%), indicative of XAU/USD continuing to climb to higher levels. 

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