Gold Prices Under Pressure After Solid Housing, Manufacturing Numbers

Gold prices are flat in Wednesday trading, with a spot price of $1287.51 late in the European session. Gold dipped to a two-month low on Tuesday as Existing Homes Sales beat the estimate and the Richmond Manufacturing Index rebounded sharply, hitting a three-month high. In Wednesday releases, the highlight of the day is New Home Sales. The markets are expecting a stronger reading in March.

Gold dropped to a low of $1277.16 on Tuesday, the metal’s lowest level since February. Solid US releases in April have made the precious metal less attractive as a hedge against the greenback, and gold has slid from a high of $1331 in little more than a week. On Tuesday, US Existing Home Sales has been on a long downturn, reflecting trouble in the housing sector. The key indicator edged lower in March, dropping to 4.59 million, down from 4.60 million a month earlier. However, it did beat the estimate of 4.57 million, marking the first time that the indicator has beaten the forecast since August. There was also good news form the manufacturing sector, as the Richmond Manufacturing Index jumped to 7 points, crushing the estimate of 0 points.

US inflation levels have been lukewarm, but so far the Federal Reserve has done little more than point out that it would like to see inflation move closer to the Fed’s target of 2%.  The House Price Index, a gauge of activity in the housing sector, rose a respectable 0.6% last month, matching the forecast. It’s a different tale in the Eurozone, where inflation continues to be persistently low and there is real concern about deflation, which could inflict serious damage on the fragile Eurozone economy. The ECB has balked at taking any action to deal with inflation, but its hand may be forced if inflation levels don’t show some life.

The markets haven’t reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his “right” to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn’t have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.

XAU/USD for Wednesday, April 23, 2014

XAU/USD April 23 at 12:50 GMT

XAU/USD 1285.32 H: 1289.00 L: 1282.22

XAU/USD Technical

• XAU/USD is flat in Wednesday trade. The pair dipped to a low of $1282.22 late in the Asian session.
• 1273 is providing strong support. This line has remained intact since mid-February.
• 1300, a key level, is the next resistance line. This is followed by resistance at 1315.
• Current range: 1273 to 1300

Further levels in both directions:

• Below: 1273, 1260, 1241 and 1215
• Above: 1300, 1315, 1355, 1388 and 1403

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in Wednesday trade. This is consistent with the pair’s current movement, as gold is showing little movement. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold moving higher against the dollar.

Gold is trading quietly in Wednesday trade, as the precious metal remains under pressure. XAU/USD is steady in the European session.

XAU/USD Fundamentals

• 13:45 US Flash Manufacturing PMI. Estimate 56.2 points.
• 14:00 US New Home Sales. Estimate 455K.
•  14:30 US Crude Oil Inventories. Estimate 2.6M.

*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.