Gold Pulls Above $1300 As Markets Eye US Inflation Data

Gold has edged higher in Wednesday trade, as the metal has climbed back above the $1300 level. In the European session, the spot price is at $1303.92. On the release front, US Core Retail Sales and Retail Sales both missed expectations on Tuesday. Today’s highlight out of the US is the Producer Price Index.

The crisis in Ukraine remains in the headlines, as pro-Russian separatists held referendums on Sunday and declared self-rule after the vote.  The Ukraine government denounced the referendums as illegal and European countries have threatened further sanctions against Russia. However, sanctions have been limited so far, as Europe is dependent on Russia for energy supplies. Elections scheduled in Ukraine on May 25th remain in jeopardy and there are mounting fears that the country could slide into civil war, as fighting continues between government and separatist forces. Gold prices often react to geopolitical developments, so traders should expect some volatility from the metal as the election date nears.

Low inflation levels has been a persistent problem in the US, and Fed chair Yellen highlighted this issue when speaking before Congress last week. Inflation levels are nowhere near the Fed’s target of 2.0%, and weak inflation is a sign of an underperforming US economy. PPI, a key inflation indicator, will be released on Wednesday. The index improved to 0.5% last month, but the markets are bracing for a weak reading of just 0.2% for April. If this modest estimate is not met, the dollar could lose some ground.

XAU/USD for Wednesday, May 14, 2014

XAU/USD May 14 at 11:00 GMT

XAU/USD 1304.01 H: 1305.89 L: 1291.56

XAU/USD Technical

• XAU/USD has posted gains in Wednesday trade.
• 1300 is providing weak support. There is stronger support at 1273.
• 1315 is the next line of resistance.
• Current range: 1300 to 1315.

Further levels in both directions:

• Below: 1300, 1273, 1260, 1252 and 1241
• Above: 1315, 1330, 1350 and 1388

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Wednesday, continuing the trend we saw a day earlier. This is not consistent with the pair’s movement, as gold prices have moved higher. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold continuing to gain ground against the US dollar.

Gold has climbed back above $1300 on Wednesday and is putting pressure on the dollar in the European session.

XAU/USD Fundamentals

• 12:30 US PPI. Estimate 0.2%.
• 12:30 US Core CPI. Estimate 0.2%.
• 14:30 US Crude Oil Inventories. Exp. -0.4M.

*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.