Gold – Listless Ahead of Fed Statement

Gold is flat on Wednesday, with the spot price at $1271.10 per ounce in Wednesday’s European session. On the release front, today’s highlight is the Federal Reserve Policy Statement, with the markets anticipating another trim to QE.

Gold investors remain cautious, as the markets wait for the Federal Reserve to release a policy statement later in the day. The Fed is expected to trim its QE program by another $10 billion, which would reduce the asset purchase scheme to $35 billion/month. The big question is when the Fed will raise interest rates, but Fed chair Janet Yellen is unlikely to shed much light on that issue. If, as expected, QE is wound up in 2014, we could see a rate hike in the first half of 2015. However, cuts to QE are dependent on the health of the US economy, which continues to move in the right direction, despite some bumps in the road.

The news out of the US was mixed on Tuesday. Building Permits dropped to 0.99M, well below the estimate of 1.07M. On the inflation front, CPI moved up modestly, posting a gain of 0.3%. This was the strongest gain we’ve seen since January 2013. CPI followed suit, climbing to an eleven-month high. The index rose to 0.4%, beating the estimate of 0.2%.

In Iraq, the situation remains tense, as militants linked to al-Qaeda continue to push back government troops and expand the territory under their control. The insurgents are only about 60 kilometers from the capital of Baghdad, and the situation has quickly escalated into a major crisis for both the Iraqi and US governments. Gold prices jumped to three-week highs on Monday, as concerned investors snapped up gold, which is considered a hedge during periods of geopolitical instability. We could see gold prices climb higher if the situation deteriorates.

XAU/USD for Wednesday, June 18, 2014

XAU/USD June 18 at 9:40 GMT

XAU/USD 1271.10 H: 1271.55 L: 1266.33

XAU/USD Technical

• Gold is flat on Wednesday.
• 1260 continues to provide support. This is followed by a support level at 1250.
• 1275 is the next resistance line. This is followed by the round number of 1300.
• Current range: 1260 to 1275.

Further levels in both directions:

• Below: 1260, 1250, 1230 and 1209
• Above: 1275, 1300, 1315 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Wednesday, continuing the trend we saw a day earlier. This is not consistent with what we are seeing from the pair, as gold is almost unchanged. The ratio is made up of a substantial majority of long positions, reflecting a strong trader bias towards gold breaking out and moving higher.

Gold has posted modest losses on Wednesday. XAU/USD is almost unchanged in the European session.

XAU/USD Fundamentals

• 12:30 US Current Account. Estimate -96B.
• 14:30 US Crude Oil Inventories. Estimate -0.6M.
• 18:00 US FOMC Economic Projections.
• 18:00 US FOMC Statement.
• 18:00 US Federal Fund Rate. Estimate <0.25%.
• 18:30 US FOMC Press Conference.

*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.