Gold Posts Strong Gains, US Durable Goods Jump

Gold has reversed directions and posted strong gains on Thursday. The spot price for one ounce of gold stands at $1238.15 in the North American session. On the release front, US durable reports were excellent as Core Durable Goods Orders gained 1.8%, while Durable Goods Orders surged 4.9%. Unemployment Claims rose to 272 thousand, within expectations.

Gold prices have surged about 16% in 2016, and the upward movement has continued this week. The commodity is a traditional safe-haven, and the market turmoil gripping the global markets, due primarily to the Chinese slowdown and the crash of oil prices, has prodded nervous investors to flee risk and snap up safe-haven assets like gold. This economic turbulence has been a boon for gold, and with these economic conditions likely to continue for some time, gold could continue to record strong gains.

US fundamentals have been lukewarm early on in 2016, and the American consumer has become less optimistic about the economy as a result. This was underscored by CB Consumer Confidence, which slid to 92.2 points in February, well off the forecast of 97.4 points. This marked a three-month low for the key indicator. Weaker consumer confidence could well translate into a decrease in consumer spending, a key driver of economic growth. On Friday, the US releases Preliminary GDP for the fourth quarter, with the estimate standing at 0.4%.

US crude prices remain above the $30 level, but the prognosis for a recovery in prices does not appear promising. Oil producing nations have been unable to agree on ways to reduce production in order to raise prices. Saudi Arabia and Russia have shown willingness to lower production, but not unexpectedly, Iran has been far less flexible, as it is desperate for cash and is looking to gain as much market share as possible following a long absence as an oil exporter. On Tuesday, Saudi oil minister Ali Ibrahim Naimi said that producers could meet in March to discuss an output freeze, but he ruled out production cuts. Earlier in the week, the International Energy Agency (IEA) issued a pessimistic report about the future of oil prices. The IEA said that oil prices are unlikely to show any significant rise before 2017, and any price rise will be gradual due to the huge inventories which have filled storage facilities to capacity across the globe, including those in the US. The IEA did not mince words in its assessment, stating that “today’s oil market conditions do not suggest that prices can recover sharply in the immediate future – unless, of course, there is a major geopolitical event”. Meanwhile, US Crude Inventories jumped to 3.5 million last week, well above the estimate of 2.0 million, as US crude supplies remain much higher than demand.

XAU/USD Fundamentals

Thursday (Feb. 25)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%. Actual 1.8%
• 8:30 US Unemployment Claims. Estimate 271K. Actual 272K
• 8:30 US Durable Goods Orders. Estimate 3.0%. Actual 4.9%
• 9:00 US HPI. Estimate 0.5%. Estimate 0.4%
• 10:30 US Natural Gas Storage. Estimate -125B

Upcoming Key Events

Friday (Feb. 26)

• 8:30 US Preliminary GDP. Estimate 0.4%

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, February 25, 2016

XAU/USD February 25 at 12:10 EST

Open: 1230.26 Low: 1221.78 High: 1253.32 Close: 1238.15

XAU/USD Technical

• XAU/USD posted gains in the Asian session. The pair has shown limited movement in the European and North American sessions.
• 1232 is providing support
• There is resistance at 1255
• Current range: 1232 to 1255

Further levels in both directions:

• Below: 1232, 1205, 1191 and 1175
• Above: 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight movement towards short positions. Long positions retain a slight majority (53%), which is indicative of trader bias towards gold continuing its current movement 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.