Gold Prices Start Week With Losses – Are We Headed to $1300?

Gold prices continue to head south, as the base metal has resumed its losing ways on Monday, erasing the gains seen on Friday. In North American trade, the spot price for an ounce of gold is $1316.80, down 0.52% on the day. On the release front, key US indicators were mixed. Personal Spending improved to 0.4%, matching the forecast. This marked a 3-month high. The news was not as positive from the housing sector, as Pending Home Sales dropped to 0.4%, down sharply from 3.1% in the previous release. On Tuesday, the key event is ISM Manufacturing PMI.

As the US dollar continues to shine, gold prices have been under pressure, losing 2.0% since April 16. The symbolic $1300 level is in sight, a support level not breached since late December. There are a number of factors weighing on gold prices. Investor risk appetite remains strong, as tensions in the Korean peninsula have dropped rapidly. The leaders of North and South Korea met last week for a historic meeting, and US President Trump is scheduled to meet with North Korean leader Kim in the near future. On the domestic front, the US economy continues to perform well and inflation is moving higher. This has raised expectations that the Federal Reserve will raise rates four times in 2018, which is bullish for the US dollar.

US indicators ended the week with the first GDP report for the first quarter. Advance GDP posted a respectable gain of 2.3% which beat the estimate of 2.0 percent. Still, this was a significant drop from GDP in the fourth quarter of 2018, which came in at 2.8 percent. Analysts also took note of the Employment Cost Index, which rose from 0.6% to 0.8%, another indication that inflation is moving higher. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers continue to project a total of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the US dollar could continue to make headway against its major rivals, including gold.

XAU/USD Fundamentals

 Monday (April 30)

• 8:30 US Core PCE Price Index. Estimate 0.2%
• 8:30 US Personal Spending. Estimate 0.4%
• 8:30 US Personal Income. Estimate 0.4%
• 9:45 US Chicago PMI. Estimate 58.2
• 10:00 US Pending Home Sales. Estimate 0.6%

Tuesday (May 1)

• 10:00 US ISM Manufacturing PMI. Estimate 58.6

*All release times are DST

*Key events are in bold

XAU/USD for Monday, April 30, 2018

XAU/USD April 30 at 12:45 DST

Open: 1323.70 High: 1325.03 Low: 1310.30 Close: 1316.80

XAU/USD Technical

• XAU/USD edged lower in the Asian session and recorded stronger losses in European trade. The pair edged downwards in North American trade but has reversed directions
• 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

In the Monday session, XAU/USD ratio is showing long positions with a majority (60%). This is indicative of trader bias towards XAU/USD reversing directions and moving upwards.  

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.