Gold Sticks to $1300, Investors Await Non Farm Payrolls, Wage Growth

Gold has posted gains in the Thursday session. In the North American session, the spot price for one ounce of gold is $1301.14, unchanged on the day. On the release front, consumer data was positive, as Personal Spending and PCE Price Index both beat their estimates, with readings of 0.2% and 0.6%, respectively. There was more good news as unemployment claims dropped sharply to 221 thousand, beating the estimate of 228 thousand. On Friday, British Manufacturing PMI is expected to dip to 53.5 points. In the U.S, the focus will be on employment data, with the release of nonfarm payrolls and wage growth.

The political uncertainty which has gripped Italy has shaken up the markets and boosted gold prices this week. President Sergio Mattarella is looking for a way to avoid new elections, after an inconclusive election in March. The two largest parties, the League Nord and the Five Star Movement proposed a eurosceptic finance minister, but this was blocked by the pro-European Matterella. This triggered a political crisis which led to a selloff of Italian stocks and bonds. The prime minister-elect, Giuseppe Conte, then announced that he had withdrawn his mandate to form a government, and Mattarella invited Carlo Cottarelli, a former IMF economist, to form a temporary technocrat government. There was talk of an election in the fall or even earlier, but Mattarella has agreed to let the two parties again try and form a coalition government.  The twists and turns in this saga will likely continue to have an impact on the direction of gold prices.

Is the Federal Reserve moving closer to a neutral monetary policy? Recent statements by FOMC policymakers appear to support such a conclusion, which would mean that the Fed would let the economy ‘ride on its own steam’ without intervening by adjusting interest rates. In the meantime, the Fed continues to project two more rate hikes in 2018, after raising rates by a quarter-point in March. The most likely dates for a rate hike are June and September. A fourth hike in December is possible, with a likelihood of about 40%. The minutes of the May meeting noted that policymakers would consider allowing inflation to rise above the Fed’s 2% target for a temporary period, which means that the Fed would not rush to raise rates based on the inflation target.

XAU/USD Fundamentals

Thursday (May 31)

• 7:30 US Challenger Job Cuts. Actual -4.8%
• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.4%. Actual 0.6%
• 8:30 US Unemployment Claims. Estimate 228K. Actual 221K
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
• 9:45 US Chicago PMI. Estimate 58.2
• 10:00 US Pending Home Sales. Estimate 0.4%
• 10:30 US Natural Gas Storage. Estimate 100B
• 11:00 US Crude Oil Inventories. Estimate -0.4M
• 12:45 US FOMC Member Rafael Bostic Speaks
• 13:00 US FOMC Member Lael Brainard Speaks

Friday (June 1)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 189K
• 8:30 US Unemployment Rate. Estimate 3.9%

*All release times are DST

*Key events are in bold

XAU/USD for Thursday, May 31, 2018

XAU/USD May 31 at 12:20 DST

Open: 1298.13 High: 1306.64 Low: 1292.90 Close: 1301.14

XAU/USD Technical

XAU/USD inched higher in the Asian session and edged lower in European trade. XAU/USD has been choppy in North American trade

• 1285 is providing support
• 1307 is the next resistance line
• Current range: 1285 to 1307

Further levels in both directions:

• Below: 1285, 1260 and 1236
• Above: 1307, 1337, 1375 and 1416

OANDA’s Open Positions Ratio

In the Thursday session, XAU/USD ratio is showing long positions. Currently, long positions have a majority (66%), indicative of trader bias towards XAU/USD continuing to move to higher 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.