Gold Lower as ADP Nonfarm Payrolls Beats Estimate

Gold has posted losses of about 1 percent on Wednesday, reversing the gains made in the Tuesday session. In North American trade, gold is trading at a spot price of $1225.96 an ounce. In economic news, ADP Nonfarm Employment Change, which measures payrolls in the private sector, posted a strong reading of 200 thousand, better than the estimate of 195 thousand. This indicator will be followed by the official Nonfarm Payrolls report on Friday, with the estimate standing at a healthy 206 thousand. As well, Crude Oil Inventories posted a surplus of 2.3 million, well below the estimate of 3.1 million.

After several Federal Reserve members suggested that the Fed should consider raising rates soon, speculation heated up about a possible April hike. However, Janet Yellen poured cold water on rate hike enthusiasm and surprised the markets with an ultra-dovish speech in New York on Tuesday. Yellen served notice that the Fed would continue its cautious approach towards monetary tightening, given the turbulent global economy and risks due to the Chinese slowdown. Yellen downplayed higher inflation levels, which in January reached 1.7 percent, the highest in almost two years. This reading is close to the Fed’s target of 2.0 percent and some Fed members have gone on record saying that the Fed should raise rates before inflation pushes above the 2.0 percent threshold. At the same time, Yellen acknowledged that there were encouraging signs in the US economy, including a strong labor market. It will be interesting to see if Yellen’s cautious assessment will be reinforced or challenged by her Federal Reserve colleagues in the coming days.

The US economy expanded at a respectable growth of 1.4 percent in the fourth quarter, above the estimate of 1.0 percent. However, there are signs that we could see softer numbers for the first quarter of 2016. Earlier this week, the Atlanta Fed downgraded its forecast for Q1 from 1.4 percent to 0.6 percent. The original forecast, released just last week, was lowered in response to a downgraded forecast of personal income and outlays by the US Bureau of Economic Analysis. If US economic activity did in fact weaken in Q1, we could see the US dollar lose ground against its major rivals.

XAU/USD Fundamentals

• 8:15 ADP Nonfarm Employment Change. Estimate 195K. Actual 200K
• 10:30 US Crude Oil Inventories. Estimate 3.1M. Actual 2.3M

Upcoming Key Events

Thursday (March 31)

• 8:30 US Unemployment Claims. Estimate 266K

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Wednesday, March 30, 2016

XAU/USD March 30 at 12:00 DST

Open: 1239.06 Low: 1223.25 High: 1244.12 Close: 1225.96

XAU/USD Technical

• XAU/USD showed marginal movement in the Asian session. The pair was choppy in European trade and has posted losses in the North American session.
• 1205 is providing support
• 1232 was tested in resistance earlier and is a weak line
• Current range: 1205 to 1232

Further levels in both directions:

• Below: 1205, 1191 and 1169
• Above: 1232, 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is showing movement towards short positions. Long positions retain a strong majority (56%), indicative of trader bias towards gold reversing directions and moving 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.