Gold Edges Higher, Investors Looking For Rate Hints From Fed

Gold prices have steadied on Wednesday, following two straight losing sessions. In North American trade, the spot price for an ounce of gold is $1305.56, up 0.12% on the day. On the release front, ADP Nonfarm Payrolls dropped to 204 thousand, compared to 241 thousand a month earlier. Still, this beat the estimate of 200 thousand. Later in the day, the Federal Reserve will set the benchmark interest rate and issue a rate statement. On Thursday, the US will release two key indicators – unemployment claims and ISM Non-Manufacturing PMI.

All eyes are on the Federal Reserve, which will release a rate statement on Wednesday. Policymakers are expected to maintain the benchmark rate at a range between 1.50% and 1.75%, and analysts will be keeping a close eye on the rate statement for clues about future rate hikes. Although the Fed is currently projecting three rate hikes in 2018, there is growing sentiment that the Fed will bump this up to four increases. The Fed last raised rates in March, and some analysts see the Fed raising rates once each quarter  – in June, September and December. Higher inflation has raised speculation that the Fed will consider raising its rate hike forecast. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index, hit the Fed’s target of 2% inflation for the first time in a

The US dollar continues to gain ground, and that has been bad news for gold prices. Gold has plunged 3.4% since April 16 and is likely to fall below the symbolic $1300 level, for the first time 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.

XAU/USD Fundamentals

Wednesday (May 2)

• 8:15 US ADP Nonfarm Employment Change. Estimate 200K. Actual 204K
• 10:30 US Crude Oil Inventories. Estimate 1.0M. Actual 6.2M
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.75%

Thursday (May 3)

• 8:30 US Unemployment Claims. Estimate 225K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 58.1

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, May 2, 2018

XAU/USD May 2 at 12:15 DST

Open: 1304.09 High: 1311.96 Low: 1304.09 Close: 1305.56

XAU/USD Technical

• XAU/USD edged higher in the Asian session and was flat in European trade. The pair has edged lower in North American trade
• 1285 is providing support
• 1307 was tested earlier in resistance and is under pressure
• 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

XAU/USD ratio is showing little movement in the Wednesday session. Currently, long positions have a majority (68%), indicative of trader bias towards XAU/USD continuing to move 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.