Gold Gains Limited as ADP Nonfarm Payrolls Beats Expectations

Gold has posted gains in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1275.10, up 0.26% on the day. In economic news, ADP Nonfarm Payrolls came in at 135 thousand, but managed to beat the estimate of 131 thousand. Later in the day, the US releases the ISM Nonfarm Manufacturing report, and Federal Reserve Chair Janet Yellen will speak at an event in hosted by the St. Louis Fed.

Gold prices showed some strength earlier on Wednesday, but the metal has retracted in the North American session, in response to the ADP Nonfarm Payrolls report. The key indicator dropped sharply, from 237 thousand in August to just 135 thousand, but this was better than expected. The hurricanes which tore through Texas and Florida caused extensive damage, and with many workers in those states unable to work, the markets were braced for low employment numbers. The official nonfarm payrolls, which will be released on Friday, are also expected to sharply decline in September, with a forecast of 85 thousand, compared to the August release of 156 thousand. Will the official release follow suit and beat the estimate?

Has the Federal Reserve decided to raise rates one final time in 2017? Just a few weeks ago, federal futures had priced in a December hike at below 50 percent, but the odds have surged to 76 percent, according to the latest CME Fed Watch release. Although FOMC members remain divided on the prudence of another rate hike in 2017, Fed Chair Janet Yellen has broadly hinted that she favors a December move, and the markets have picked up on her message. The US economy continues to perform well, and the labor market remains close to capacity. The Achilles heel in an otherwise strong economy is inflation, which remains well below the Fed’s target of 2 percent. If sentiment towards a December hike remains high, the US dollar will be attractive to investors and could gain ground.

XAU/USD Fundamentals

Wednesday (October 4)

• 8:15 US ADP Nonfarm Employment Change. Estimate 131K. Actual 135K
• 9:45 US Final Services PMI. Estimate 55.1
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.5
• 10:30 US Crude Oil Inventories. Estimate -0.5M
• 15:15 Federal Chair Janet Yellen Speaks

Thursday (October 5)

• 8:30 US Unemployment Claims. Actual 266K

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, October 4, 2017

XAU/USD October 4 at 9:30 EST

Open: 1271.78 High: 1282.32 Low: 1271.46 Close: 1275.10

XAU/USD Technical

• XAU/USD edged higher in the Asian and European sessions. The pair has lost ground in North American trade
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1240 and 1213
• Above: 1285, 1307, 1337 and 1367

OANDA’s Open Positions Ratio

XAU/USD remains unchanged this week. Currently, short positions with a majority (62%), indicative of trader bias towards XAU/USD reversing directions and moving lower.

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