XAU/USD – Gold Unchanged as Fed Minutes Looms

Gold is under pressure in the Tuesday session but remains unchanged. In North American trade, the spot price for one ounce is $1237.53. In economic news, US Flash Service and Manufacturing PMIs showed expansion and beat the estimates. On Wednesday, the Federal Reserve will publish the minutes of the January policy meeting. Traders should treat this event as a market-mover for gold, which is sensitive to interest rates moves.

The Federal Reserve will again be in the spotlight on Wednesday. The central bank finally pressed the rate trigger in December, a full year after the previous rate hike. However, the hike has not put a dent in gold prices, which have risen some 7.5 percent in 2017. Despite speculation that another hike is on the way, market uneasiness over the Trump administration continues to grow, dampening investor appetite for risk. Trump continues to have difficulty filling in key cabinet positions and the media continues to probe connections between Trump officials and Russia. Trump has fired back by bitterly attacking the media, and lost in the mayhem is a clear and coherent economic policy. Although Trump has been in office for just over a month, the perception of a muddled and disoriented White House is creating uncertainty and has helped boost gold, a traditional safe-haven asset.

With Fed Chair Janet Yellen’s giving the US economy a thumbs-up last week, the markets are keen to review the Fed policy minutes, which will be released on Wednesday. Testifying before Congress last week, Yellen noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. Yellen strongly hinted that a rate hike was imminent, leaving the markets to speculate if the Fed prefers to make a move in March or June. If the US economy stays on track in 2017, analysts expect two or three rate hikes of a quarter-point. At the same time, the Fed wants to take into account the economic stance of the new administration, but this remains an elusive goal.

XAU/USD Fundamentals

Tuesday (February 21)

• 8:50 US FOMC Member Neel Kashkari Speech
• 9:45 US Flash Manufacturing PMI. Estimate 54.7
• 9:45 US Flash Services PMI. Estimate 55.8
• 12:00 US FOMC Member Patrick Harker Speech

Wednesday (February 22)

• 10:00 US Existing Home Sales. Estimate 5.55M
• 14:00 US FOMC Minutes

XAU/USD for Tuesday, February 21, 2017

XAU/USD February 21 at 13:35 EST

Open: 1236.96 High: 1238.06 Low: 1226.07 Close: 1237.53

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair posted losses in the European session but recovered in North American trade
• 1232 is providing weak support
• 1260 is the next 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 in the Tuesday session. Currently, long positions command a majority (63%), indicative of trader bias towards XAU/USD breaking out and moving to higher levels.

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