Gold Steady at $1125

Gold is steady on Tuesday, trading at a spot price of $1126.65 an ounce in the North American session. In economic news, there are no major US events on the schedule. The IBD/TIPP Economic Optimism report posted a reading of 47.8 points, pointing to pessimism among US consumers.

Market turbulence in January has been a boon for gold, as the base metal recorded impressive gains of 5.3% last month. Gold prices have benefited from the turmoil which has gripped the markets due to the plunge in oil prices and the Chinese slowdown. Global demand remains weak, and this was underscored on Monday, as US and Chinese manufacturing numbers posted soft numbers. In the US, ISM Manufacturing PMI slipped to 48.2 points, its lowest level since June 2009. This was the second straight reading below the 50-point level, which separates between contraction and expansion. There was no relief from China, the world’s second largest economy after the United States. Two key Chinese indicators, Manufacturing PMI and Caixin Manufacturing PMI, remained below the 50-line, pointing to continuing contraction in the Chinese manufacturing sector. Weaker manufacturing demand points to a slowdown in the Chinese economy. Nervous investors have responded to uncertain economic times by dumping risk assets due and snapping up gold, traditionally a safe-haven asset.

With the Federal Reserve staying on the sidelines last month and holding rates at 0.25%, market speculation has now shifted to the March policy meeting. Will we see another rate hike at that time? The Fed probably cannot answer this question just yet, so the markets will have to show some patience. The inflation picture remains problematic, with the Fed saying that inflation levels will remain low and may not reach the target of 2.0% until 2018. Given these Fed’s continuing concerns about a lack of inflation, it’s hard to foresee another rate hike in March, absent a strong improvement in key US indicators. The manufacturing sector is another weak spot in the US economy, as underscored by a weak ISM Manufacturing PMI on Monday. Other December manufacturing numbers were also dismal. Last week, Durable Goods dropped 1.2%, while Core Durables plunged 5.1%, its weakest showing since August 2014. These soft numbers underscore ongoing weakness in the US manufacturing sector, which has not improved despite positive economic conditions.

XAU/USD Fundamentals

Tuesday (Feb. 2)

• 10:00 US IBD/TIPP Economic Optimism. Estimate 47.8 points. Actual 47.8 points
• All Day – US Total Vehicle Sales. Estimate 17.4M
• 13:00 – US FOMC Member Esther George Speaks

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, February 2, 2016

XAU/USD February 2 at 11:40 EST

Open: 1128.25 Low: 1123.39 High: 1131.09 Close: 1126.65

XAU/USD Technical

• XAU/USD posted slight losses in the Asian session. After leveling off for European session, the pair has been choppy in the North American session.
• There is weak resistance at 1134
• 1098 is providing support
• Current range: 1098 to 1134

Further levels in both directions:

• Below: 1098, 1080, 1043 and 1024
• Above: 1134, 1151 and 1175

OANDA’s Open Positions Ratio

XAU/USD ratio remains unchanged this week. Long positions continue to command a solid majority (65%). This is indicative of strong trader bias towards gold continuing to gain ground.

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.