Gold Steady as US Consumer Confidence Soars to 16-year High

Gold continues to have a quiet week. In Tuesday’s North American trade, gold is trading at $1255.06 per ounce. On the release front, CB Consumer Confidence rocketed to 125.5, crushing the estimate of 113.9. There was also good news on the manufacturing front, as the Richmond Manufacturing Index improved to 22, well above the forecast of 16 points.

CB Consumer Confidence surprised the markets by climbing to 125.5 in March, its highest level since December 2000. Clearly, consumers remain optimistic about the US economy, and a major contributor to this sentiment is the red-hot labor market, which remains close to capacity. An increase in consumer confidence often translates into stronger consumer spending, which would be bullish for the US dollar, which has headed lower since the Federal Reserve rate hike on March 15. We’ll get a look at consumer spending data on Friday, with the release of Personal Spending.

Donald Trump suffered his first major setback as president last week, as his bill to replace the Affordable Care Act was pulled before it even went to a vote. Trump is used to giving the orders in the private sector and on reality TV, but he didn’t get his way on healthcare, despite the Republicans enjoying a majority in Congress. This bruising defeat has sent the US dollar sharply lower, and sent market jitters higher. Trump’s administration has stumbled out of the starting gate, and after more than two months in office, he has yet to provide any details or even an outline of economic policy. The inquiry into the Trump administration’s links with Russia is gathering steam, and is another cause for concern for nervous investors. Trump has said he will now focus on tax reform, but he has his work cut out, trying to convince a skeptical Congress and general public that he can deliver the goods and pass new, effective legislation.

Gold prices are sensitive to rate moves, so investors continue to look for clues about what the Federal Reserve has planned for the remainder of 2017. The Fed’s rate statement and dot plot indicated that the Fed is looking at another two hikes in 2017, which would make three in total. This forecast was reiterated by Chicago Fed President Charles Evans last week. Although one could make a strong case that three rate hikes in 2017 would be impressive, the markets appear disappointed, and would like four hikes, given the strong performance of the US economy. The Fed’s cautious approach has reduced investors’ appetite for risk, which has been good news for gold, a safe-haven asset.

XAU/USD Fundamentals

Tuesday (March 28)

• 8:30 US Goods Trade Balance. Estimate -66.6B. Actual -64.8B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.2%. Actual 0.4%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%. Actual 5.7%
• 9:59 US Richmond Manufacturing Index. Estimate 16. Actual 22
• 10:00 US CB Consumer Confidence. Estimate 113.9. Acutal 125.6
• 13:00 US FOMC Member Robert Kaplan Speech

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, March 28, 2017

XAU/USD March 28 at 11:10 EST

Open: 1252.04 High: 1258.37 Low: 1251.15 Close: 1255.06

XAU/USD Technical

• XAU/USD was flat in the Asian and European sessions. The pair has edged higher in North American trade
• 1232 is providing support
• 1260 is a weak resistance line
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199, 1174 and 1146
• Above: 1260, 1285 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged this week. Currently, long positions have a majority (59%). This is indicative of trader bias towards XAU/USD continuing to move higher.

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