Gold above $1200 as Powell comments send dollar downwards

Gold is slightly higher at the start of the trading week. In Monday’s North American session, the spot price for one ounce of gold is $1209.20, up 0.29% on the day. There are no U.S indicators on the schedule. On Tuesday, the key event is CB Consumer Confidence.

Gold ended the week on a high note, posting gains of 1.7% on Friday. The gains were in response to comments from Federal Reserve Chair Jerome Powell, who spoke at the Jackson Hole Economic Symposium on Friday. Powell reiterated that the Fed would continue its policy of gradual interest rate hikes, and this pledge not to change policy sent the dollar lower and boosted gold prices. Powell argued that current monetary policy is prudent, but the Fed continues to face criticism on both ends. Some analysts have argued that the Fed has been too aggressive, given weak inflation, while others say the Fed should tighten more quickly, due to the extremely tight labor market. Powell appeared to take a middle approach of raising rates, but slowly. The Fed has already raised rates twice this year, and a September hike is practically a given, with the CME Group estimating the odds of a hike at 96%. The odds of a December hike currently stand at 66%.

The new trading week has started with reports that the NAFTA negotiations are showing progress. The Mexican peso has responded with strong gains on Monday, but the Canadian dollar has been steady. A senior Mexican official said that the issues surrounding the auto sector were “basically resolved”, and President Trump said on Saturday that a deal was near.  A new NAFTA agreement would reduce trade tensions between the U.S and the other two NAFTA members, Canada and Mexico. At a time of escalating trade tensions, a new NAFTA agreement would likely bolster risk appetite, which in turn could weigh on gold prices.

XAU/USD Fundamentals

Monday (August 27)

• There are no U.S events

Tuesday (August 28)

• 10:00 US CB Consumer Confidence. Estimate 126.6

*All release times are DST

*Key events are in bold

XAU/USD for Monday, August 27, 2018

XAU/USD August 27 at 11:50 DST

Open: 1205.78 High: 1212.41 Low: 1203.21 Close: 1209.20

XAU/USD Technical

In the Asian session, XAU/USD posted small gains but then recovered. This trend was repeated in European trade. The pair has edged higher in North American trade

• 1204 is providing support
• 1220 is the next resistance line
• Current range: 1204 to 1220

Further levels in both directions:

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

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