Gold Prices Soften On Weaker Chinese Demand

Gold was unable to consolidate above the $1300 level on Monday and finds itself trading around the $1290 line in Tuesday’s European session. On the release front, the markets are keeping a close eye on the Federal Reserve minutes, which will be released on Wednesday.

Demand for gold has dropped in the first quarter of 2014, weighing on the price of the precious metal. On Tuesday, the World Gold Council released a report which found that global demand for gold had dropped in Q1 to its lowest level in four years. Demand for the metal by China, the largest buyer of gold, slipped by 18% in Q1, and other major purchasers such as India also recorded a drop in demand. Gold tends to react to geopolitical events, and the ongoing crisis in Ukraine could continue to cause volatility in gold prices.

In the US, last week ended with encouraging housing numbers. Building Permits jumped to 1.08 million, well above the estimate of 1.01 million. This was the highest level we’ve seen since December 2006. Housing Starts continues to move higher and climbed to 1.07M, compared to the estimate of 0.98M. This marked a five-month high. Meanwhile, UoM Consumer Sentiment dipped to 81.8 points, short of the estimate of 84.7 points.

Although inflation numbers have not impressed, employment and manufacturing numbers looked sharp on Thursday. Unemployment Claims were outstanding, dropping to 297 thousand last week. This easily beat the estimate of 321 thousand and was the lowest level we’ve seen since May 2007. On the manufacturing front, the Philly Fed Manufacturing Index dipped to 15.4 points, but this was well above the estimate of 13.9 points. As well, Empire State Manufacturing Index climbed to 19.0 points, crushing the estimate of 5.5. This was the indicator’s best showing in two years.

XAU/USD for Tuesday, May 20, 2014

XAU/USD May 20 at 12:20 GMT

XAU/USD 1291.60 H: 1294.79 L: 1288.77

XAU/USD Technical

• 1280 is providing support. This is followed by support at 1275.
• On the upside, 1300 has some breathing room as XAU/USD trades at lower levels. 1315 is the next resistance level.
• Current range: 1280 to 1300.

Further levels in both directions:

• Below: 1280, 1275, 1260 and 1252
• Above: 1300, 1315, 1330, 1350 and 1388

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in long positions in Tuesday trade. This is not consistent with the pair’s movement, as gold has edged lower. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold gaining ground against the US dollar.

Gold has lost ground in Tuesday trade . XAU/USD is steady in the European session.

XAU/USD Fundamentals

• 16:30 FOMC Member Charles Plesser Speaks.
• 17:00 FOMC Member William Dudley Speaks.

*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.