Gold Prices Unchanged, Markets Eye FOMC Statement

Gold is almost unchanged in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1306.13, down 0.04%. In economic news, housing data was positive. Building Permits jumped to 1.30 million, well above the forecast of 1.22 million. Housing Starts improved to 1.18 million, edging above the forecast of 1.17 million. On Wednesday, the US Federal Reserve will wind up its policy meeting and release a rate statement.

What can we expect from the Federal Reserve on Wednesday? There is virtually no chance that the benchmark rate of 1.25% will change, so the markets are focusing on the Fed’s bloated balance sheet, which currently stands at $4.2 trillion. Earlier in the year, the Fed outlined plans to reduce the balance sheet by not replacing some maturing bonds, starting at $10 billion/month, and gradually moving higher. This move can be viewed as a mini-rate hike, and could provide a boost for the US dollar against its major rivals. The markets will also be keeping a close eye on the tone of the rate statement, as an optimistic view of the US economy could boost the greenback. Will the Fed provide any hints about one last rate hike in 2017? The Fed is still debating whether it will raise rates in December, as persistently low inflation has hampered plans for a third rate hike in 2017. However, the odds of a December increase have been moving higher in September, and are currently at 56%.

US consumer spending has been a sore spot in a generally strong economy, and there was more disappointing news on Friday, as August retail sales reports missed expectations. Core Retail Sales slowed to 0.2%, missing the forecast of 0.5%. Retail Sales was even worse, posting a decline of 0.2%, compared to the estimate of +0.1%. Much of the slowdown in the August numbers are attributable to lower automobile sales, which have been slowing in recent months, and was likely made worse by Hurricane Harvey. These numbers underscore continuing weakness in consumer spending, despite a strong labor market. The Federal Reserve remains concerned about weak consumer spending, a key driver of economic growth, and could make reference to the lack of spending in its rate statement.

FedWatch Tool Shows Growing Probability of a Fed December Rate Hike

XAU/USD Fundamentals

Tuesday (September 19)

• 8:30 US Building Permits. Estimate 1.22M. Actual 1.30M
• 8:30 US Current Account. Estimate -113B. Actual -123B
• 8:30 US Housing Starts. Estimate 1.17M. Actual 1.18M
• 8:30 US Import Prices. Estimate 0.4%. Actual 0.6%

Wednesday (September 20)

• 10:00 US Existing Home Sales. Estimate 5.46M
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.25%
• 14:30 US FOMC Press Conference

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, September 19, 2017

XAU/USD September 19 at 12:55 EST

Open: 1306.75 High: 1310.72 Low: 1305.56 Close: 1306.13

XAU/USD Technical

• XAU/USD showed little movement in the Asian and European sessions. The pair has ticked lower in North American trade
• 1285 is providing support
• 1307 was tested in earlier in resistance and remains fluid
• Current range: 1285 to 1307

Further levels in both directions:

• Below: 1285, 1260 and 1240
• Above: 1307, 1337, 1367 and 1392

OANDA’s Open Positions Ratio

XAU/USD is showing little movement in the Tuesday session. Currently, long positions have a slender majority (52%), indicative of a slight trader bias towards XAU/USD breaking out and moving higher. 

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