Gold Takes Breather After Strong Gains

Gold prices is trading sideways in the Thursday session, after surging higher on Wednesday. Currently, the spot price for an ounce of gold is $1351.30, up 0.05% on the day. On the release front, PPI gained 0.4%, matching the forecast. Core PPI also gained 0.4%, beating the estimate of 0.2%. Both indicators rebounded after declines in the previous month. Unemployment Claims climbed to 230 thousand, just above the estimate of 229 thousand. Manufacturing data was mixed. The Empire State Manufacturing Index continues to slow down, and dropped to 13.1, missing the estimate of 17.7 points. The Philly Fed Manufacturing Index rose to 25.8, easily beating the estimate of 21.5 points. On Friday, the US releases key housing and consumer confidence numbers.

The US dollar has sagged against the major currencies, and gold has jumped on the bandwagon. On Thursday, gold jumped 1.6% on disappointing retail sales reports. Concerns of high inflation was a catalyst for the market sell-off last week, and fears of a resumption in the downward spiral are weighing on the dollar. If investors react negatively and ditch the markets yet again, safe-haven assets like gold will likely be the big winners. Gold prices were down in the first half of February, but gold has recovered these losses, after posting strong gains of 2.7% this week. US fundamentals remain solid, as the US economy is showing strong expansion, the labor market remains at capacity, and inflation levels are moving higher. This has led some analysts to attribute the recent sag in the US dollar to technical factors rather than fundamental reasons.

The new head of the Federal Reserve, Jerome Powell, received a rude welcome from the stock markets, as he started his new position last week. Powell sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time. Currently, the Fed is planning three hikes this year, but that could change to four or even five hikes, if inflation continues to head upwards and the robust US economy maintains its strong expansion.

XAU/USD Fundamentals

Thursday (February 15)

• 8:30 US PPI. Estimate 0.4%. Actual 0.4%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.4%
• 8:30 US Empire State Manufacturing Index. Estimate 17.7. Actual 13.1
• 8:30 US Philly Fed Manufacturing Index. Estimate 21.5. Actual 25.8
• 8:30 US Unemployment Claims. Estimate 229K. Actual 230K
• 9:15 US Capacity Utilization Rate. Estimate 78.0%. Actual 77.5%
• 9:15 US Industrial Production. Estimate +0.2%. Actual -0.1%
• 10:00 US NAHB Housing Market Index. Estimate 72. Actual 72
• 10:30 US Natural Gas Storage. Estimate -193B. Actual -194B
• 16:00 US TIC Long-Term Purchases. Estimate 50.3B

Friday (February 16)

• 8:30 US Building Permits. Estimate 1.29M
• 8:30 US Housing Starts. Estimate 1.23M
• 8:30 US Import Prices. Estimate 0.6%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.4

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, February 15, 2018

XAU/USD February 15 at 12:15 EST

Open: 1350.66 High: 1357.19 Low: 1348.61 Close: 1351.30

XAU/USD Technical

• XAU/USD posted slight gains in the Asian session but retracted in European trade. The pair is showing limited movement in North American trade
• 1337 is supporting support
• 1375 is the next resistance line
• Current range: 1337 to 1375

Further levels in both directions:

• Below: 1337, 1307, 1285 and 1260
• Above: 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is showing movement towards long position. Currently, long positions have a majority (55%), indicative of trader bias towards XAU/USD breaking out and moving higher.

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.