XAU/USD – Gold Climbs to 3-Week Highs as Appetite for Risk Wanes

Gold has posted strong gains on Tuesday, as the metal trades at a spot price of $1365.30 per ounce in the North American session. On the release front, there are no key events on the schedule. Personal Spending posted a gain of 0.4%, edging above the estimate of 0.3%. On Wednesday, the US will release two key events – ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change.

Gold prices continue to move higher this week, as the soft US GDP report has weighed on market sentiment. Preliminary GDP for the second quarter disappointed, as the markets had expected a strong gain of 2.6%, while the economy responded with a much smaller gain of 1.2%. A September rate hike appears less likely, given recent economic data. On Sunday, FOMC William Dudley, a close ally of Janet Yellen, said that the Brexit fallout posed a risk to the US economy and urged the Fed to proceed with caution before raising interest rates. The US will release wage growth and nonfarm payrolls later in the week, and these key employment numbers will be carefully monitored by the Fed as it mulls over a possible rate hike. The markets have circled September and December as the most likely dates for a rate hike, but if the Fed isn’t satisfied with the economy’s performance, it could delay any moves until 2017.

The manufacturing sector has been one of the soft spots in the US economy, and the week started with lukewarm manufacturing numbers. ISM Manufacturing PMI and Manufacturing Prices pointed to slight expansion but both indicators fell short of their estimates. An ongoing global economic slump has taken its toll on the manufacturing sectors of developed economies, and the US is no exception. As well, Construction Prices disappointed with a drop of 0.6%, its fourth decline in the past five months.

XAU/USD Fundamentals

Tuesday (August 2)

• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
• 8:30 US Personal Spending. Estimate 0.3%. Actual 0.4%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.2%
• All Day – US Total Vehicle Sales. Estimate 17.1M

Upcoming Key Events

Wednesday (August 3)

• 8:15 ADP Non-Farm Employment Change. Estimate 171K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.0

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, August 2, 2016

XAU/USD August 2 at 13:10 EDT

Open: 1352.75 High: 1367.30 Low: 1347.13 Close: 1365.30

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair posted strong gains in European trade and is showing limited movement in the North American session
• 1361 has switched to support following strong gains by XAU/USD on Tuesday. It is a weak line
• There is resistance at 1388
• Current range: 1361 to 1388

Further levels in both directions:

• Below: 1361, 1331, 1307 and 1279
• Above: 1388, 1416 and 1447

OANDA’s Open Positions Ratio

XAU/USD ratio has shown slight gains in short positions. Long positions command a strong majority (60%), indicative of trader bias towards XAU/USD continuing to move upwards. 

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.