Gold pauses after sharp losses, inflation reports next

Gold has steadied on Tuesday, after posting sharp losses in the Monday session. In North American trade, the spot price for one ounce of gold is $1189.60, up 0.13% on the day. There are no major U.S events on the schedule. On Wednesday, the U.S publishes PPI and the U.S Treasury Currency report, a semi-annual publication.

Investors are keeping a close eye on the U.S Treasury’s currency report, which will be released on Thursday. In the most recent report, the U.S did not name any of its major partners as currency manipulators, but it did criticize China for the “non-market direction” of its economy. Since then, the Trump administration has imposed some $200 billion in tariffs on Chinese goods. China has retaliated with its own tariffs on U.S goods, and there has been speculation that China could respond to the U.S tariffs by devaluating the Chinese yuan, in order to bolster Chinese exports. In 2015 and 2016, the markets dropped sharply on fears that China would implement a major devaluation of its currency. The report should be treated as a market-mover.

Nonfarm payrolls for September may have missed its target, but the Federal Reserve remains on track to raise interest rates in December. The anticipation of further rate hikes in December and throughout 2019 has boosted the yield on U.S treasury bills, while at the same time weighing heavily on gold prices. On Friday, 10-year treasury bonds climbed to their highest level since 2011, and if yields continue to climb during the week, gold’s downward spiral could continue.

Noisy Markets

Will the bond market bloodbath resume?

US 10-year yield above 3.25% for first time since 2011

XAU/USD Fundamentals

Tuesday (October 9)

• 5:40 US NFIB Small Business Index. Estimate 108.9. Actual 107.9
• Tentative – US IBD/TIPP Economic Optimism. Estimate 54.6
• 21:10 US FOMC Member John Williams Speaks

Wednesday (October 10)

• 8:30 US PPI. Estimate 0.2%
• 8:30 US Core PPI. Estimate 0.2%
• Tentative – US Treasury Currency Report

*All release times are DST

*Key events are in bold

XAU/USD for Tuesday, October 9, 2018

XAU/USD October 9 at 11:50 DST

Open: 1188.10 High: 1191.98 Low: 1183.39 Close: 1189.60

XAU/USD Technical

XAU/USD edged higher in the Asian session but reversed directions in European trade. The pair has posted gains in North American trade

• 1170 is providing support
• 1204 is the next resistance line
• Current range: 1170 to 1204

Further levels in both directions:

• Below: 1170, 1146 and 1115
• Above: 1204, 1220, 1236 and 1261

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