Gold Edges Higher, Markets Nervously Eye US GDP

Gold has edged higher on Wednesday. In the North American session, spot gold is trading at $1249.56 per ounce. In economic news, Pending Home Sales disappointed with a decline 0.8%, well short of the forecast of +0.9%. On Thursday, the US releases Final GDP and unemployment claims.

Investors are casting a nervous glance towards Thursday, as the US releases Final GDP for the first quarter. Preliminary GDP, which was released in May, came in at 1.2%, and this is the same estimate for the upcoming GDP report. Recent economic data has been softer than expected, notably construction and manufacturing reports. US durable goods releases were weak in May. Core Durable Goods broke a streak of two straight declines, but the weak gain of 0.1% missed expectations. Durable Goods declined 1.1%, its sharpest decline since June 2016. The slowdown in orders of business equipment could weigh on second quarter growth. Last week, it was the turn of construction numbers to disappoint, as Housing Starts and Building Permits both missed expectations. Consumer spending has also been softer than expected, and if Final GDP falls short of the modest estimate of 1.2%, the dollar could respond with losses.

This week, the markets are focused on the picturesque city of Sintra, Portugal. Sintra is hosting the ECB Forum, as central bankers have stepped in as market-movers this week. On Tuesday, the euro posted strong gains after ECB President Mario Carney sounded upbeat about the eurozone economy and shrugged off concerns about low inflation. On Wednesday, it was BoE Governor Mark Carney’s turn in the limelight, as his comments have sent the pound higher. Carney said that the BoE would have to consider removing monetary stimulus, and the markets jumped on his comments as a possible sign that he was not adamantly opposed to rate hikes in the near future. BoE policymakers have waged a public debate about rate policy, with Carney stating last week that he was opposed to hikes, only to be contradicted by MPC member Ande Haldane, who said he had been close to voting in favor of a rate hike at the June rate meeting. The vote at the meeting was 5-3 in favor of maintaining rates, surprising the markets, which had predicted a 7-1 vote to keep rates at current levels. Although there are renewed fears that Brexit will take a toll on the British economy, inflation is running close to 3%, well above the BoE’s target of 2 percent. A rate increase would help lower inflation, but Carney, who has voiced concerns about Brexit’s negative ramifications since the vote last June, has been solidly against a rate increase. The comments from Draghi and Carney could improve investors’ risk appetite, which in turn could send gold prices to lower levels.

XAU/USD Fundamentals

Wednesday (June 28)

• 8:30 US Goods Trade Balance. Estimate -66.2B. Actual -65.9B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.2%. Actual 0.3%
• 10:00 US Pending Home Sales. Estimate 0.9%. Actual -0.8%
• 10:30 US Crude Oil Inventories. Estimate -2.1M. Actual +0.1M

Thursday (June 29)

• 8:30 US Final GDP. Estimate 1.2%
• 8:30 US Unemployment Claims. Estimate 241K

*All release times are EDT

*Key events are in bold

XAU/USD for Wednesday, June 28, 2017

XAU/USD June 28 at 12:30 EST

Open: 1246.17 High: 1256.63 Low: 1245.87 Close: 1249.56

XAU/USD Technical

• XAU/USD edged higher in the Asian and European sessions. The pair has reversed directions in North American trade
• 1232 is providing support
• 1260 is the next resistance line
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199 and 1170
• Above: 1260, 1285, 1307 and 1337

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement so far this week. Currently, long positions have a majority (68%). This is indicative of XAU/USD continuing to climb to higher levels. 

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