Gold Rises to $1240, ADP Nonfarm Payrolls Beats Expectations

Gold has reversed directions and posted slight gains on Wednesday, recovering the losses from Tuesday’s session. The base metal is trading at a spot price of $1240.10 per ounce in the North American session. On the release front, ADP Nonfarm Payrolls improved to 214 thousand, easily beating the estimate of 185 thousand. Crude Oil Inventories posted a huge surplus of 10.4 million, crushing the estimate of 2.5 million. On Thursday, there are two key releases – Unemployment Claims and ISM Non-Manufacturing PMI.

Strong US employment numbers in the second half of 2015 was a key reason that the Fed pressed the rate trigger in December. At that time, the Fed hinted that a series of rate hikes were planned for 2016, but softer US numbers this year have dampened expectations, and some economists have predicted that the Fed will hold off from any further hikes until 2017. However, a solid ADP Nonfarm Payroll report has led to speculation about a March hike, and if Friday’s official Nonfarm Payrolls beats the estimate of 195 thousand, we are likely to hear louder speculation about a possible hike. However, in all likelihood the US economy would have to show sharp improvement before the cautious Fed would be comfortable raising rates.

Meanwhile, January reports from the US housing sector are raising concerns. Housing Starts and Building Applications fell in January, and New Home Sales and Pending Home Sales followed suit, missing expectations. Activity in the housing sector is closely monitored by analysts, as a decrease in home building can have a negative impact on other sectors of the economy. The US manufacturing sector has also struggled, but there was positive news last week as Core Durable Goods Orders and Durable Goods Orders were much stronger than expected in January.

XAU/USD Fundamentals

• 8:15 US ADP Non-Farm Employment Change. Estimate 185K. Actual 214K
• 10:30 US Crude Oil Inventories. Estimate 2.5M. Actual 10.4M
• 14:00 US Beige Book

Upcoming Key Events

Thursday (March 3)

• 8:30 US Unemployment Claims. Estimate 271K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 49.8 points

*Key releases are highlighted in bold

*All release times are EST

XAU/USD for Wednesday, March 2, 2016

XAU/USD March 2 at 12:45 EST

Open: 1232.80 Low: 1225.40 High: 1242.50 Close: 1240.10

XAU/USD Technical

• XAU/USD posted losses in the Asian session but recovered in European trade. The pair has posted gains in the North American session.
• 1232 remains busy and has switched to support following gains by gold on Wednesday
• There is resistance at 1255
• Current range: 1232 to 1255

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio continues to show little movement this week. Long positions retain a majority (55%), which is indicative of trader bias towards gold continuing to move to higher levels.

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.