Gold jumps as risk appetite sinks on trade war fears

Gold has posted sharp gains on Thursday. In the North American session, the spot price for one ounce of gold is $1285.45, up 0.97% on the day. In the U.S., today’s highlight was unemployment claims. The indicator dropped from 212 thousand to 211 thousand, its lowest level in five weeks. On Friday, the U.S. release durable goods orders.

Is the trade war between China and the U.S. spiraling out of control? Investors are clearly nervous about the escalation in rhetoric and in action. China has reacted angrily to U.S. sanctions on Huawei and has suspended trade talks with the U.S. Technology stocks and oil are sharply lower on Thursday, as nervous investors have snapped up safe-haven assets such as gold. The base metal has shown sharp swings throughout May, as the ups-and-downs in the trade war have taken investors on a roller coaster ride.

The Federal Reserve released the minutes of the policy meeting held earlier in May. Fed members continued to preach patience, stating that rates will likely remain unchanged for some time. The minutes indicated that although members are more optimistic about economic growth, they remain committed to maintaining current rate levels, given that inflation remains low. It should be noted that the Fed policy meeting took place on May 1-2, one week before President Trump announced new tariffs on China, which has significantly escalated trade tensions between the U.S. and China.

The Fed minutes may have reinforced the central bank’s stance that no rate moves are planned until next year, but the markets aren’t buying this message, with many analysts expecting at least one rate cut in 2019. The CME Group has priced in a 36% likelihood of a 25-point basis cut at the September meeting. The possibility of lower U.S. rates makes the greenback less attractive to investors and could boost gold at the expense of the U.S. dollar.

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XAU/USD Fundamentals

Thursday (May 23)

• 8:30 US Unemployment Claims. Estimate 215K. Actual 211K
  

Friday (May 24)

• 8:30 US Core Durable Goods Orders. Estimate 0.1%
• 8:30 US Durable Goods Orders. Estimate -2.0%

*All release times are DST

*Key events are in bold

XAU/USD for Thursday, May 23, 2019

XAU/USD May 23 at 12:40 DST

Open: 1273.43 High: 1287.35 Low: 1272.91 Close: 1285.45

XAU/USD Technical

XAU/USD was flat in the Asian session and edged higher in European trade. The pair has posted strong gains in North American trade

• 1284 has switched to support after strong gains by XAU/USD on Thursday. It is a weak line
• 1306 is the next resistance line
• Current range: 1284 to 1306
  

Further levels in both directions:

• Below: 1284, 1261, 1243 and 1218
• Above: 1306, 1326 and 1344

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