Gold Gains Ground, Puts Brakes on Dollar Rally

Gold has posted gains in the Thursday session, erasing the losses seen on Wednesday. In North American trade, the spot price for an ounce of gold is $1331.17, up 0.50% on the day. On the release front, unemployment claims dropped to 222 thousand, well below the estimate of 230 thousand.

Gold prices remain continue to fluctuate. The base metal has lost 1.3% this week, erasing much of last week’s gains. Concerns that strong US numbers could stoke inflation and more rate hikes sparked the recent turbulence in global stock markets. This has triggered volatility in gold, as gold prices are sensitive to moves (or expected moves) in interest rates. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four, or even five times in 2018.

The Federal Reserve released the minutes of its January meeting, and as expected, the benchmark rate was left unchanged at a rate between 1.25% and 1.50%. The message from policymakers was that further rate hikes could be in the cards, due to strong economic conditions in the US. In the words of the minutes, policymakers “anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labor market conditions would strengthen further”. At the December meeting, the Fed penciled in three rate hikes in 2018, and there was no reference to a quicker pace of hikes in the January minutes. As for inflation, the minutes did not reveal any concern. Most Fed members were of the opinion that inflation would rise towards the Fed target of 2 percent.

XAU/USD Fundamentals

Thursday (February 22)

• 00:15 US FOMC Member Randal Quarles Speaks
• 8:30 US Unemployment Claims. Estimate 230K. Actual 222K
• 10:00 US CB Leading Index. Estimate 0.7%. Actual 1.0%
• 10:00 US FOMC Member William Dudley Speaks
• 10:30 US Natural Gas Storage. Estimate -121B. Actual -124B
• 11:00 US Crude Oil Inventories. Estimate 2.2M. Actual -1.6M
• 12:10 US FOMC Member Raphael Bostic Speaks 

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, February 22, 2018

XAU/USD February 22 at 12:40 EST

Open: 1324.57 High: 1331.37 Low: 1321.03 Close: 1331.17

XAU/USD Technical

• XAU/USD showed little movement in the Asian and European sessions. The pair has posted gains in North American trade
• 1307 is providing support
• 1337 is the next resistance line
• Current range: 1307 to 1337

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is showing strong movement towards long positions. Currently, short positions have a slim majority (51%), indicative of a lack of trader bias as to what direction XAU/USD will take next.

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.