Gold Slips on Solid PMI, Consumer Confidence

Gold has ticked higher in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1269.13, down 0.56% on the day. On the release front, US indicators were impressive. CB Consumer Confidence jumped to 125.9, well above the forecast of 121.1 points. Chicago PMI improved to 66.2, its highest level since March 2011. Wednesday will be busy. The US will release two key events – ADP Nonfarm Payrolls and ISM Manufacturing PMI. As well, the FOMC will release its monthly rate statement.

The US consumer is optimistic about the economy, and that confidence has translated into stronger spending. CB Consumer Confidence jumped to 125.9 points, and last week’s UoM Consumer Sentiment climbed to an all-time high of 100.7 points. Personal spending gained 1.0% in September, its sharpest gain since April 2016. The strong reading comes on the heels of Friday’s UoM Consumer Sentiment Report, which hit an all-time record in September. Consumer spending is a key driver of the economy, accounting for two-thirds of economic growth.

The Federal Reserve is also in focus this week, with the release a rate statement on Wednesday. The Fed will almost certainly refrain from a rate hike, so analysts will be combing through the rate statement, looking for clues about future rate moves. The markets have priced in a December rate hike at a whopping 96 percent, and the markets are looking for clues with regard to rate policy in 2018. This will depend to a large degree on the new chair of the Fed, who will take over from Janet Yellen in February. The two front-runners, John Taylor and Jerome Powell, have very different stances on monetary policy, which has created some suspense ahead of President Trump’s nomination. Trump is expected to choose the new head before departing for Asia at the end of the week. Powell is expected to continue Yellen’s incremental approach to raising rates, while Taylor is a proponent of much higher rates, as underscored in his “Taylor Rule”, which calls for higher rates when inflation is high or the labor market is at full capacity.

Gold prices move inversely to interest rate hikes, so traders should keep a close eye on the Bank of England, which is widely expected to raise rates for the first time since 2007. Still, there is some dissension in the BoE, as some policymakers are against a rate hike. Both sides can point to economic data to make their case. Inflation is running close to 3 percent, and a rate hike would help curb inflation and bring it closer to the BoE target of 2 percent. Opponents of a hike point to an economy that has softened in recent months and argue that a rate hike would raise the pound, hurting exports. Although a rate hike is price in at 90 percent, the sheer significance of a rate hike could weigh on gold prices if the BoE goes ahead and raises rates.

XAU/USD Fundamentals

Tuesday (October 31)

• 8:30 US Employment Cost Index. Estimate 0.7%. Actual 0.7%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.8%. Actual 5.9%
• 9:45 US Chicago PMI. Estimate 60.2. Actual 66.2
• 10:00 US CB Consumer Confidence. Estimate 121.1. Actual 125.9

Wednesday (November 1)

• 8:15 US ADP Nonfarm Employment Change. Estimate 191K
• 10:00 US ISM Manufacturing PMI. Estimate 59.4
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.25%

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, October 31, 2017

XAU/USD October 31 at 13:05 EST

Open: 1276.41 High: 1278.24 Low: 1267.84 Close: 1269.13

XAU/USD Technical

• XAU/USD ticked lower in the Asian session but recovered in European trade. The pair has posted small gains in North American session
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1240 and 1213
• Above: 1285, 1307, 1337 and 1367

OANDA’s Open Positions Ratio

XAU/USD ratio is showing limited movement in the Tuesday session. Currently, long positions have a majority (68%), indicative of trader bias towards XAU/USD reversing directions and moving to higher ground.

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.