Gold Climbs to 12-Month High as Jobless Claims Soar

Gold is showing strong gains in the Thursday session, reversing the losses on Wednesday. In the North American session, gold is trading at $1346.30, up 0.96% on the day. On the release front, unemployment claims jumped to 298 thousand, well above the estimate of 245 thousand.

The ongoing crisis over North Korea has triggered sharp gains in gold prices, as weaker risk appetite has led to investors snapping up safe-haven gold. Earlier on Thursday, gold touched a high of $1346.01, its highest level since September 2016. The week began with North Korea announcing that it had tested a hydrogen bomb which could be used in a missile strike. South Korea and Japan are alarmed at the North Korean moves, and South Korea’s President Moon Jae-in has warned that the situation risked becoming “uncontrollable”. As tensions between Washington and Pyongyang have increased, the US dollar has lost ground to safe-haven assets such as gold. If the situation continues to deteriorate, traders can expect gold prices to continue to climb.

US employment numbers continue to disappoint. Unemployment claims jumped to 298 thousand last week, the highest level since April 2015. This follows weak readings in July for nonfarm payrolls and wage growth. However, the jump in jobless claims can be attributed to Hurricane Harvey, which led to thousands of displaced workers in Texas filing for unemployment benefits. Unemployment numbers could remain high in upcoming weeks, until flooded areas are able to get on their feet and rebuilding efforts pick up steam.

It’s no secret that inflation is a sore point in the US economy, and this was reiterated in the Federal Reserve Beige Book report on Wednesday. The survey found that wage pressure remains limited, despite the fact that many businesses cannot fill job openings. The lack of wage growth has been an important factor in ongoing weak inflation levels, despite moderate economic growth and a very strong labor market. Weak inflation has hampered the Fed’s plans to raise interest rates a third time this year, and the odds of a December hike have dipped to just 31%, as the markets are increasingly doubtful that the Fed will make a move before next year.

XAU/USD Fundamentals

Thursday (September 7)

• 8:30 US Unemployment Claims. Estimate 245K. Actual 298K
• 8:30 US Revised Nonfarm Productivity. Estimate 1.3%. Actual 1.5%
• 8:30 US Revised Unit Labor Costs. Estimate 0.3%. Actual 0.2%
• 10:00 US IBD/TIPP Economic Optimism. Estimate 53.1
• 10:30 US Natural Gas Storage. Estimate 63B
• 11:00 US Crude Oil Inventories. Estimate 4.1M
• 19:00 US FOMC Member William Dudley Speaks

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, September 7, 2017

XAU/USD September 7 at 12:35 EST

Open: 1333.56 High: 1349.44 Low: 1332.48 Close: 1346.01

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair has posted gains in the European and North American sessions
• 1337 is providing support
• 1367 is the next resistance line
• Current range: 1337 to 1367

Further levels in both directions:

• Below: 1337, 1307, 1285 and 1260
• Above: 1367, 1392 and 1416

OANDA’s Open Positions Ratio

XAU/USD remains unchanged this week. Currently, short and long positions are evenly split, indicative of a lack of trader bias as to what direction XAU/USD will take next. 

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