Gold Yawns as Retail Sales Jump

Gold has ticked lower in the Thursday session. In North American trade, the spot price for an ounce of gold is $1254.27, down 0.11% on the day. On the release front, consumer spending indicators looked sharp, as Core Retail Sales and Retail Sales improved in November, with readings of 1.0% and 0.8%, respectively. Both indicators beat expectations. There was positive news on the employment front, as unemployment claims fell to 225 thousand, well below the forecast of 237 thousand. On Friday, the US releases the Empire State Manufacturing Index.

There were no surprises from the Federal Reserve, which raised rates on Wednesday, bringing the benchmark rate to a range between 1.25% and 1.50%. This marked the third rate hike in 2017, testimony to the strong performance of the US economy. The Fed statement was optimistic about the economy, noting that the labor market “remained strong”. It also lowered its unemployment forecast in 2018 from 4.1% to 3.9%, and revised growth for 2018 from 2.1% to 2.5%. Despite this upbeat assessment, gold prices moved higher, as the US was broadly lower after the rate announcement. Why did investors give the dollar a thumbs-down despite a rate hike? One reason is the Achilles heel of the US economy – inflation. The Fed has not changed its September forecast for rate hikes next year, with the Fed dot plot indicating that three rate hikes are projected for 2018. This disappointed some investors who would like to see four increases next year. As well, the rate statement said that the Fed did not expect tax reform legislation to have any long-term effect on the economy, contradicting White House claims that the legislation would trigger substantial growth in the economy.

The Fed is pleased with the strength of the US economy, but remains puzzled why strong growth and a red-hot labor market has not led to higher inflation. The labor market continues to operate at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages. The Fed appears ready to continue to jack up rates, despite the lack of inflation. The markets are preparing for another quarter-point increase next month, with the odds of a rate hike standing at a remarkable 100%, according to the CME Group.

XAU/USD Fundamentals

Thursday (December 14)

• 8:30 US Core Retail  Sales. Estimate 0.6%. Actual 1.0%
• 8:30 US Retail  Sales. Estimate 0.3%. Actual 0.8%
• 8:30 US Import Prices. Estimate 0.7%. Actual 0.7%
• 8:30 US Unemployment Claims. Estimate 237K. Actual 225K
• 9:30 US CB Leading Index. Actual -0.2%
• 9:45 US Flash Manufacturing PMI. Estimate 54.0. Actual 55.0
• 9:45 US Flash Services PMI. Estimate 54.8. Actual 52.4
• 10:00 US Business Inventories. Estimate -0.1%. Actual -0.1%
• 10:30 US Natural Gas Storage. Estimate -55B. Actual -69B

Friday (December 15)

• 8:30 US Empire State Manufacturing Index. Estimate 18.8

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, December 14, 2017

XAU/USD December 14 at 12:50 EST

Open: 1255.62 High: 1259.17 Low: 1250.54 Close: 1254.27

XAU/USD Technical

• XAU/USD edged higher in the Asian session but retracted in European trade. The pair is showing little movement in the North American session
• 1240 is providing support
• 1260 is the next resistance line
• Current range: 1240 to 1260

Further levels in both directions:

• Below: 1240, 1213 and 1188
• Above: 1260, 1285, 1307 and 1337

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in the Thursday session. Currently, long positions have a majority (75%), indicative of trader bias towards XAU/USD reversing directions and moving to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.