Gold Dips as U.S. PPI Rebounds, Risk Appetite Increases

Gold has posted losses in the Wednesday session, erasing the gains seen on Tuesday. In the North American session, the spot price for an ounce of gold is $1322.30, down 0.77%. On the release front, inflation numbers improved in August, although these were shy of their estimates. PPI improved to 0.2%, short of the estimate of 0.3%. As well, Core CPI gained 0.1%, missing the forecast of 0.2%. Traders should be prepared for more movement from gold on Thursday, as the US releases CPI reports and unemployment claims.

US inflation levels remain soft, well below the Federal Reserve’s inflation target of 2.0%. This was again the case on Wednesday, as PPI and Core PPI, which measures inflation in the manufacturing sector, recorded small gains. The US labor market remains very strong, but wage pressure has been limited, despite the fact that many businesses cannot fill job openings. Weak inflation has hampered the Fed’s plans to raise interest rates a third time this year, and the odds of a December rate hike are currently pegged at 41%, as the markets are increasingly doubtful that the Fed will make a move before next year. If the August CPI numbers beat expectations on Thursday, the likelihood of a December hike should move closer to 50% ,and any change in these odds could have a significant impact on gold prices.

As one of the most popular safe-haven assets, gold prices have moved higher in recent weeks, as tensions have ratcheted upwards over North Korea’s nuclear program. In recent weeks, risk appetite has waned, as North Korea as inflamed tensions by firing missiles over Japan and testing nuclear devices, much to the consternation of the US, Japan and South Korea. However, a lull in the crisis as seen investors return to risk assets, triggering lower gold prices. Still, North Korea remains a geopolitical hot spot, and investors could flock back to gold if the war of words between US President Trump and North Korean President Kim Jong-un escalates and Kim decides to shake things up with a missile launch or nuclear test.

XAU/USD Fundamentals

Wednesday (September 13)

• 8:30 US PPI. Estimate 0.3%. Actual 0.2%
• 8:30 US Core PPI. Estimate 0.3%. Actual 0.1%
• 10:30 US Crude Oil Inventories. Estimate 4.1M. Actual 5.9M
• 13:01 US 10-y Bond Auction
• 14:00 US Federal Budget Balance. Estimate -118.6B

Upcoming Key Events

Thursday (September 14)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 303K

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, September 13, 2017

XAU/USD September 13 at 12:40 EST

Open: 1331.95 High: 1334.82 Low: 1320.90 Close: 1322.30

XAU/USD Technical

• XAU/USD edged lower in the Asian session but recovered in European trade. The pair has lost ground in the North American session
• 1307 is providing support
• 1337 has some breathing room in resistance after losses by XAU/USD on Wednesday
• Current range: 1307 to 1337

Further levels in both directions:

• Below: 1307, 1285 and 1260
• Above: 1337, 1367, 1392 and 1416

OANDA’s Open Positions Ratio

XAU/USD is showing slight movement towards long positions. Currently, long positions have a slight majority (53%). This is indicative of slight trader bias towards XAU/USD reversing directions and moving higher. 

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