Gold dips as greenback continues to shine

Gold prices have dropped in the Thursday session. In North American trade, the spot price for one ounce of gold is $1229.10, down 0.39% on the day. In the U.S, durable goods reports were mixed, and unemployment claims moved higher. On Friday, the U.S releases two key indicators – Advance GDP and UoM Consumer Sentiment.

U.S durable goods reports for September were mixed. Core durable goods orders came in at 0.1% for a second straight month, missing the estimate of 0.5%. Durable goods orders dropped from 4.5% to 0.8%, but this was much better than the forecast of -1.3%. Unemployment claims rose to 215 thousand, a shade above the forecast of 214 thousand. Despite these tepid numbers, the U.S dollar is broadly higher on Thursday, and gold is lower.

Gold often acts as a safe-haven, but it’s the U.S dollar that continues to be a magnet for nervous investors, due to increasing geopolitical tensions. These include the U.S-China trade war, the uproar over the killing of a Saudi journalist in Turkey and tense relations between Moscow and Washington. There are headaches in Europe as well, with concerns over the Italian budget and the Brexit negotiations.

The Federal Reserve is widely expected to raise rates in December, which would mark the fourth rate hike this year. What can we expect in 2019? Many economists expect three rate hikes next year, and this was reinforced by Dallas Federal Reserve Bank President Robert Kaplan on Wednesday. Kaplan said he expects rates to rise into a range of 2.5% to 2.75%, or more likely, into a range of 2.75% to 3.00%. Kaplan noted that his estimate of a “neutral rate’ is slightly below 3% – anything above this level would move rates into a “restrictive’ stance, which could hamper economic growth and push inflation lower. The stock markets received a jolt this week as Chinese growth slipped to a 10-year low in the third quarter, and further weak numbers out of China could affect the U.S economy and cause the Fed to scale back its rate hike plans for 2019.

XAU/USD Fundamentals

Thursday (October 25)

• 8:30 US Core Durable Goods Orders. Estimate 0.5%. Actual 0.1%
• 8:30 US Durable Goods Orders. Estimate -1.3%. Actual 0.8%
• 8:30 US Unemployment Claims. Estimate 214K. Actual 215K
• 10:00 US Pending Home Sales. Estimate -0.1%. Actual 0.5% 
• 10:30 US Natural Gas Storage. Estimate 47B. 58B
• 12:15 US FOMC Member Clarida Speaks
• 17:30 FOMC Member Mester Speaks

Friday (October 26)

• 8:30 US Advance GDP. Estimate 3.3%
• 8:30 US Advance GDP Price Index. Estimate 2.1%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 98.9

*All release times are DST

*Key events are in bold

XAU/USD for Thursday, October 25, 2018

XAU/USD October 25 at 11:25 DST

Open: 1234.07 High: 1239.27 Low: 1228.42 Close: 1229.48

XAU/USD Technical

XAU/USD edged higher in the Asian session but retracted in European trade. XAU/USD continues to lose ground in the North American session

• 1220 is providing support
• 1236 was tested earlier in resistance
• Current range: 1220 to 1236

Further levels in both directions:

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

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