Gold Slides on Trump Tweet, Roller Coaster Ride Continues

Gold has posted sharp losses in the Thursday session, erasing the strong gains which marked the Wednesday trading. In North American trade, the spot price for an ounce of gold is $1337.67, down 1.14% on the day. In economic news, unemployment claims dropped to 233 thousand, within expectations of the estimate of 231 thousand. On Friday, the US releases the UoM Consumer Sentiment report.

It’s been a roller-coaster ride for gold over the past two days, marked by sharp gains and losses for the base metal. Tensions in the Middle East remain high, and gold prices soared higher on Wednesday, as US President Trump promised to punish the Syrian regime for an alleged chemical attack by government forces last weekend. For its part, Russia has countered that it will respond to any US move against Syria. The markets were braced for an imminent US air strike, but investors have regained some risk appetite on Thursday after Trump tweeted that a US response could come “very soon or not so soon at all.” With the possibility that Trump’s bite might not follow his bark, gold has become less attractive and dropped sharply on Thursday.

The Federal Reserve minutes had a generally hawkish tone, reflective of a solid US economy. All of the Fed policymakers indicated that the US economy would continue to improve and that inflation would rise in the next few months. At the March meeting, the Fed unanimously voted to raise rates by a quarter-point, bringing the benchmark rate to a range between 1.50% and 1.75%. The Fed projection for rate policy in 2018 remains at three hikes, although there is speculation that the Fed could revise the forecast to four rate hikes. Last week, Fed Chair Jerome Powell said that the Fed would likely continue to raise rates in order to keep a lid on inflation, but added that the rate moves would be gradual. A new headache for the Fed is the escalating trade battle between the US and China, which could hurt the economy and raise consumer prices. As for the next two rate meetings, the markets expect Powell & Co. to sit tight in May and raise rates at the June meeting.

XAU/USD Fundamentals

 Thursday (April 12)

• 8:30 US Unemployment Claims. Estimate 231K. Actual 233K
• 8:30 US Import Prices. Estimate 0.2%. Actual 0.0%
• 10:30 US Natural Gas Storage. Estimate -11B. Actual -19B
• 13:01 US 30-year Bond Auction

 Friday (April 13)

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 100.6

*All release times are DST

*Key events are in bold

XAU/USD for Thursday, April 12, 2018

XAU/USD April 12 at 12:35 EST

Open: 1353.27 High: 1353.27 Low: 1335.74 Close: 1337.84

XAU/USD Technical

• XAU/USD edged lower in the Asian session. The pair posted considerable losses in the European session and continues to head lower in North American trade
• 1337 was tested earlier in support and is a weak line. It could break in the North American session
• 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 slight gains towards short positions. Currently, short positions have a majority (55%), indicative of trader bias towards XAU/USD continuing to move to lower ground.

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.