Gold Climb Continues on US Political Risk

Gold has posted gains in the Friday session. In the North American session, spot gold is trading at $1250.50, up 0.49% on the day. On the release front, there are no US indicators on the schedule. On Thursday, US indicators were mixed. Unemployment claims dropped to 233 thousand, marking a 9-week low. The news was not as positive on the manufacturing front, as the Philly Fed Manufacturing Index slowed down to 19.5, its weakest reading since November 2016.

With the Trump administration beset by investigations and allegations of wrongdoing, investor risk appetite has decreased, boosting gold prices. Gold is up 1.7% this week and is trading at its highest level since June 29. It has been a brutal week for President Trump. Early in the week, Trump’s cherished flagship healthcare proposal, which aims to replace Obamacare, stalled in the Senate after two Republican senators said they would not support the bill. Trump has failed to pass any significant legislation so far in his term, and investors are becoming more skeptical as to whether Trump will have any more success with his tax reform and fiscal spending plans. With the Democrats forming a rock-solid wall of opposition, dissension among Republican lawmakers, many of whom are uneasy about Trump, could doom attempts by the White House to get bills through Congress. There was more bad news as Robert Mueller, the special counsel who is investigating alleged collusion between Trump and Russian officials during the US election, said he would review business transactions involving Trump as well as his associates. Trump has said that Mueller’s scope is limited to Russia, so the stage could be set for a Nixon-type showdown between the president and the special counsel investigating wrongdoing by the president.

Gold prices moved higher on Thursday after the European and Japanese central banks announced that they would continue their accommodative monetary policy. As well, the ECB and BoJ maintained the current policy of ultra-low interest rates, at 0.00% and 0.10% respectively. With the economies in the eurozone and Japan both showing improvement, there has been pressure on policymakers to reduce stimulus. However, inflation levels in the eurozone and Japan are well below the target of 2%, and the banks have reiterated that they will not taper asset-purchases until inflation levels move higher. The ECB is expected to revisit its monetary stance at its September meeting, and if policymakers decide to tighten monetary policy, gold prices could head lower.

Political Risk Jitters

Friday (July 21)

• There are no US events 

XAU/USD for Friday, July 21, 2017

XAU/USD July 21 at 9:50 EST

Open: 1244.56 High: 1252.18 Low: 1243.42 Close: 1250.50

XAU/USD Technical

• XAU/USD ticked higher in the Asian session. The pair posted slight gains in the European session and continues to move upwards 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, 1170 and 1146
• Above: 1260, 1285 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Friday session. Currently, long positions have a majority (75%), indicative of XAU/USD continuing to climb higher.

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