Gold Gains On Iraq Tensions

Gold is firm as we start the new trading week. The spot price stands at $1280.21 per ounce in Monday’s European session. The precious metal had a strong week, gaining about 2.9% against the US dollar, as fighting continues between insurgents and government forces in Iraq. On the release front, today’s highlight is Empire State Manufacturing Index. The markets are expecting another strong reading. On Friday, US key numbers were weak, as PPI and UoM Consumer Sentiment both softened in May.

In Iraq, militants linked to al-Qaeda continue to progress towards the capital of Baghdad after capturing key cities on the weekend. The insurgents have seized control of the northern oil city of Kirkuk, which could hamper oil production and exports from Iraq.  Gold prices have reached three-week highs, as concerned investors snapped up gold, which is considered a hedge during periods of geopolitical instability.

The US ended a rough week on a sour note, as inflation and consumer confidence numbers missed their estimates. PPI, a key gauge of inflation in the manufacturing sector, came in at -0.2%, its worst reading since October. The estimate stood at 0.1%. Preliminary UoM Consumer Sentiment also lost ground, falling to 81.3 points, short of estimate of 83.3. However, with only one reading this year below the 80-point level, US consumer confidence remains at high levels.

Thursday’s key US events were a major disappointment, as retail sales and employment numbers were weak. Retail Sales came in at 0.3%, short of the estimate of 0.5%. Core Retail Sales could only muster a gain of 0.1%, shy of the forecast of 0.4%. Unemployment Claims, one of the most important economic indicators, rose to 317 thousand, missing market expectations of 306 thousand. Gold took advantage of the soft US numbers, gaining about $11 on the day.

XAU/USD for Monday, June 16, 2014

XAU/USD June 16 at 11:00 GMT

XAU/USD 1280.21 H: 1284.91 L: 1278.34

XAU/USD Technical

• 1275 has reverted to a support role as gold has moved higher. Next there is a support line at 1260.
• On the upside, the round number of 1300 is the next resistance line. This is followed by resistance at 1315, which has remained firm since early May.
• Current range: 1275 to 1300.

Further levels in both directions:

• Below: 1275, 1260, 1250 and 1230
• Above: 1300, 1315, 1331 and 1342

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Monday. This is consistent with what we are seeing from the pair, which is showing little activity. The ratio is made up of a substantial majority of long positions, reflecting a strong trader bias towards gold breaking out and gaining ground against the US dollar.

Gold is showing little movement on Monday. XAU/USD has edged lower in the European session.

XAU/USD Fundamentals

• 12:30 US Empire State Manufacturing Index. Estimate 15.2 points.
• 13:00 US TIC Long-Term Purchases. Estimate 41.3 B.
• 13:15 US Capacity Utilization Rate. Estimate 78.9%.
• 13:15 US Industrial Production. Estimate 0.6%.
• 14:00 US NAHB Housing Market Index. Estimate 47 points.

*Key releases are highlighted in bold

*All release times are GMT

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.