Gold Flat as Federal Reserve Minutes Loom

Gold is showing little movement in the Wednesday session. In North American trade, spot gold is trading at $1251.36 an ounce. On the economic front, Existing Home Sales dropped sharply to 5.57 million, short of the forecast of 5.65 million. Later in the day, the Federal Reserve will release the minutes of its May policy meeting. On Thursday, the US will publish unemployment claims.

All eyes are on the Fed minutes, with the markets hoping to glean some clues about the timing of future rate moves. The Federal Reserve raised rates back in March, and the markets expect the Fed to press the rate trigger at the June policy meeting. The odds of a rate hike have increased to 83%, according to the CME Group. Just last week, the likelihood of a rate increase stood at 73%. Despite the market speculation, Fed policymakers are keeping their cards close to their chest, at least in their public appearances. On Tuesday, Philadelphia Fed President Patrick Harker said that a June move was a “distinct possibility”, but cautioned that a weak inflation report could delay a rate hike. Earlier in the week, Robert Kaplan, President of the Dallas Fed, stated that three interest increases in 2017 was “appropriate”. The Fed minutes are expected to underscore support for a June move, but may not shed much light on what happens after that. Still any clues about the Fed’s rate plans could shake up the currency markets.

The markets are keeping a close eye on the Federal Reserve, which will release the minutes of the May policy meeting. June has been circled as the next rate move, although Fed policymakers have kept their cards close to their vests. On Tuesday, Philadelphia Fed President Patrick Harker said that a June move was a “distinct possibility”, but cautioned that a weak inflation report could delay a rate hike. Earlier in the week, Robert Kaplan, President of the Dallas Fed, stated that three interest increases in 2017 was “appropriate”. The minutes are unlikely to contain any major surprises, but could underscore support for a June move. Gold prices move inversely to interest rate moves, so any clues about further rate hikes this year could send gold to lower levels.

On Tuesday, the White House presented President Trump’s 2018 budget proposal to Congress. Trump has promised to slash government spending, and the budget proposes major cuts to the Medicaid health program, disability benefits and food stamps. Trump has outlined an ambitious program to cut government spending by $3.6 trillion in the next 10 years and achieving a balanced budget by 2020. The budget also includes $25 billion for paid leave after childbirth and some $200 billion for infrastructure programs. It’s a safe bet that Trump’s budget will face tough opposition on Capitol Hill, with both Democrats and Republicans unlikely to go along with such deep cuts to social assistance programs. Still, with the Trump administration beset by Congressional investigations, the White House can point to the budget as a step forward in his agenda to cut government spending.

XAU/USD Fundamentals

Wednesday (May 24)

• 8:58 US HPI. Estimate 0.5%. Actual 0.6%
• 10:00 US Existing Home Sales. Estimate 5.65M. Actual 5.71M
• 10:30 US Crude Oil Inventories. Estimate -2.4M. Actual
• 14:00 US FOMC Minutes
• 18:00 US FOMC Member Robert Kaplan Speaks

Thursday (May 25)

• 8:30 US Unemployment Claims. Estimate 238K

*All release times are EDT

*Key events are in bold

XAU/USD for Wednesday, May 24, 2017

XAU/USD May 24 at 13:45 EST

Open: 1251.23 High: 1254.65 Low: 1247.98 Close: 1251.36

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair edged lower in European trade before recovering. XAU/USD is flat in North American trade
• 1232 is providing support
• 1260 is the next resistance line
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199, 1175 and 1146
• Above: 1260, 1285, 1307 and 1337

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in the Wednesday session. Currently, long positions have a strong majority (65%), indicative of trader bias towards XAU/USD breaking out and moving upwards. 

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