XAU/USD – Gold Gains Continues Ahead of Fed Minutes

Gold has posted modest gains on Wednesday, continuing the upward movement seen in the Tuesday session. In North American trade, the spot price for one ounce is $1164.28. In the US, today’s highlight is the Federal Reserve minutes from the December meeting. On Thursday, the US will publish ISM Non-Manufacturing PMI and two key employment indicators – ADP Employment Change and Unemployment Claims.

Gold prices plunged 12.5% in the fourth quarter, as a hot US economy and the Fed rate hike have boosted the US dollar. However, gold prices have improved since Christmas, gaining 2.7 percent. Gold has posted gains on Wednesday, as the US dollar has retreated ahead of the release of the Federal Reserve minutes. What’s ahead for gold in early 2017?, If the US economy’s strong economic growth continues, the Fed could step in with another rate hike in order to keep the economy from overheating. As gold is linked inversely to interest rates, higher rates would likely send gold to lower levels.

The spotlight will be on the Federal Reserve on Wednesday, with the release of the minutes from the December policy meeting, when the Fed finally raised rates for the first time since December 2015. Analysts will be combing through the minutes, looking for clues regarding future monetary policy. The US economy is performing very well, and the markets are hopeful that this continues as Donald Trump takes office. Trump’s economic policies remain sketchy, although he has promised to increase fiscal spending while lowering taxes. A strong US economy will likely increase investor appetite for risk, which would be bearish for gold prices.

How Much Juice Has the Big Dollar Got?

Dollar Finds its Mojo

XAU/USD Fundamentals

Wednesday (January 4)

• All Day – US Total Vehicle Sales. Estimate 17.8M
• 14:00 US FOMC Meeting Minutes

Thursday (January 5)

• 8:15 US ADP Nonfarm Employment Change. Estimate 171K
• 8:30 US Unemployment Claims. Estimate 262K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.6

*All release times are EST

* Key events are in bold

XAU/USD for Wednesday, January 4, 2017

XAU/USD January 4 at 12:00 EST

Open: 1157.02 High: 1167.96 Low: 1156.03 Close: 1164.28

XAU/USD Technical

• XAU/USD was flat in the Asian session and posted slight losses in European trade. The pair is flat in the North American session
• 1146 is providing support
• 1174 is the next resistance line
• Current range: 1146 to 1174

Further levels in both directions:

• Below: 1146, 1130, 1111 and 1076
• Above: 1174, 1199 and 1232

OANDA’s Open Positions Ratio

XAU/USD ratio is showing gains in short positions. Currently, long positions command a strong majority (76%). This is indicative of trader bias towards XAU/USD continuing to climb to higher levels.

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