Gold steady ahead of Fed minutes, Treasury currency report

Gold has posted slight gains in the Wednesday session. In North American trade, the spot price for one ounce of gold is $1227.24, up 0.19% on the day. On the release front, construction indicators missed the forecasts. Building Permits ticked up to 1.24 million, shy of the estimate of 1.27 million. Housing Starts slipped to 1.20 million, missing the forecast of 1.22 million. Later in the day, the Federal Reserve releases the minutes of its September policy meeting. After some delay, we are expecting the U.S Treasury to release its semi-annual currency report. On Thursday, the U.S publishes Philly Fed Manufacturing Index and unemployment claims.

Will there be any surprises in the U.S Treasury currency report? The report provides details of global exchange rate policies, as well as a list of countries which are deemed currency manipulators. In the April report, the U.S did not name any of its major partners as currency manipulators. Since then, the Trump administration has imposed some $200 billion in tariffs on Chinese goods. China has retaliated with its own tariffs on U.S goods, and there has been speculation that China could respond to the U.S tariffs by devaluating the Chinese yuan in order to bolster Chinese exports. In 2015 and 2016, the markets dropped sharply on fears that China would implement a major devaluation of its currency. Traders should treat the report as a market-mover.

It’s been a bumpy and bruising road for gold in recent months, but the metal has regained its luster in the month of October. During the April-September period, gold slumped some 10 percent. However, the metal has taken a reverse direction in October, with gains of 3.0 percent. Recent turbulence in U.S stock markets has spooked investors and boosted gold prices, but with the economy in excellent shape and more rate hikes on the way, gold could face further headwinds. In October, the Fed raised rates for a third time this year, and the odds of a December rate are pegged at 78%, according to the CME Group. Furthermore, the Fed indicated that three more rate hikes are on the way in 2019. This vote of confidence in the economy has strengthened the U.S dollar and conversely, weighed on gold prices.

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XAU/USD Fundamentals

Wednesday (October 17)

• 8:30 US Building Permits. Estimate 1.27M. Actual 1.24M
• 8:30 US Housing Starts. Estimate 1.20M. Actual 1.22M
• 10:30 US Crude Oil Inventories
• 12:10 US FOMC Member Lael Brainard Speaks
• 14:00 FOMC Meeting Minutes
• Tentative – U.S Treasury Currency Report

Thursday (October 18)

• 8:30 US Philly Fed Manufacturing Index. Estimate 19.7
• 8:30 US Unemployment Claims. Estimate 211K

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, October 17, 2018

XAU/USD October 17 at 11:10 DST

Open: 1224.92 High: 1229.56 Low: 1220.73 Close: 1227.24

XAU/USD Technical

XAU/USD edged lower in the Asian session. The pair reversed directions and posted considerable gains in the European session. XAU/USD is showing limited movement in North American trade

• 1220 is providing support
• 1236 is the next resistance line
• Current range: 1220 to 1236

Further levels in both directions:

• Below: 1220, 1204, 1170 and 1146
• Above: 1236, 1261 and 1284

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.