Risk Aversion Propels Gold Close to $1300

Gold prices have posted strong gains in the Tuesday session, climbing 1.2 percent. In the North American session, spot gold is trading at $1293.63 per ounce. On the release front, there was only one event on the schedule. JOLTS Jobs Openings, jumped to 6.04 million, well above the estimate of 5.65 million.

Gold has started the month of June with solid gains, climbing 2.0 percent in less than a week. The safe-haven asset has benefited from weak job data in the US, as well as the aftershocks of the London Bridge attack on the weekend. As if nervous investors didn’t have enough to worry about, the election in the UK has turned into a cliffhanger, with Prime Minister May watching helplessly as her double-digit lead over Labour leader Jeremy Corbyn has narrowed sharply, with some polls finding her lead whittled down to just one point. The political landscape has dramatically changed in just a few weeks, as the terror attacks in Manchester and London have shaken the country. The Conservatives are still favored to win the election, but if they fail to secure a majority in parliament, Theresa May’s days as prime minister could be numbered. If the Conservatives are able to form a coalition, May will find herself with a much weaker hand when entering into Brexit negotiations, as she will have to take into consideration the wishes of the opposition in order to govern. The markets are following the election campaign with bated breath, and the tremendous political uncertainty which has gripped the UK could provide further fuel for gold to continue its rally.

The Federal Reserve is widely expected to announce a rate hike next week, which would mark the second quarter-point increase in 2017. Even a shockingly soft Nonfarm Payrolls report on Friday hasn’t put much of a dent in these expectations, with are rate hike currently priced in at 91 percent. Another rate hike by the Fed would mark a vote of confidence in the US economy, but Fed policymakers continue to have some concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets remain skeptical, with the odds of a September rate hike at just 22%. However, stronger economic numbers in the third quarter could easily increase the likelihood a September hike.

XAU/USD Fundamentals

Tuesday (June 6)

• 10:00 US JOLTS Job Openings. Estimate 5.65M. Actual 6.04M

*All release times are EDT

*Key events are in bold

XAU/USD for Tuesday, June 6, 2017

XAU/USD June 6 at 13:30 EST

Open: 1279.50 High: 1296.21 Low: 1279.42 Close: 1293.63

XAU/USD Technical

• XAU/USD posted considerable gains in the Asian session. The pair recorded slight gains in the European session and is flat in North American trade
• 1285 has switched to support following strong gains from XAU/USD
• 1307 is the next resistance line
• Current range: 1285 to 1307

Further levels in both directions:

• Below: 1285, 1260, 1232, and 1199
• Above: 1307, 1337  and 1367

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight movement towards short positions. Currently, long positions have a slender majority (52%). This is indicative of XAU/USD continuing to move to higher levels. 

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