Gold Steady Ahead of US Retail Sales Data

Gold is stable in Tuesday trade, with the spot price at $1290.17 in the European session. The precious metal has made some moves towards the $1300 line this week, but so far has been unable to consolidate past this resistance level. On the release front, today’s highlights are Retail Sales and Core Retail Sales. Strong numbers from these two key indicators would point to increased consumer spending and could lift the dollar.

The crisis in Ukraine remains in the headlines as the Western countries face off against Russia. Last week, Russian President Vladimir Putin surprised observers when he urged pro-Russian separatists to postpone their referendum on independence. However, the separatists shrugged off Putin’s request and went ahead with referendums in two cities in eastern Ukraine on Sunday. Not surprisingly, voters in this pro-Russian region voted in favor of self-rule. The Ukraine government and Western countries denounced the referendums as illegal and we could see further sanctions imposed against Russia. Elections scheduled in Ukraine for the end of May remain in jeopardy and there are mounting fears that the country could slide into civil war.

The ECB held its policy meeting last Thursday, and the euro took traders and investors on a wild ride in both directions. Mario Draghi took note of worrying inflation indicators, saying that food and energy prices, the strong euro and weak domestic demand were all factors in weak inflation which has engulfed the Eurozone. He then surprised the markets by adding that the Bank would be comfortable taking action in June, after re-examining inflation and growth forecasts in June. This is the clearest sign in months that the ECB is prepared to take action, and a reaction from the market was quick to follow, with the euro suffering sharp losses after coming within a few pips of the key 1.40 line. Draghi added that the ECB would continue to monitor exchange rates. Many analysts are of the view that the “line in the sand” for the ECB is the 1.40 level, and if the euro rebounds and moves above this line, it’s more than likely that the ECB will take action to reign in the high-flying currency.

There were no surprises from Federal Reserve Chair Janet Yellen last week, who gave a cautious thumbs-up to the economic recovery in testimony before Congress. Yellen said that the US economy has improved, but noted two sore spots – the employment market and inflation which remains below the Fed’s target of 2%. Yellen stated that she therefore expects that low interest rate levels will continue to stay low for a “considerable time”. Yellen has stated previously that slack remains in the economy, and the Fed is expected to proceed carefully with future tapers to its QE scheme. Since December, the Fed has trimmed the asset-purchase program by almost half, cutting it to $45 billion each month.

XAU/USD for Tuesday, May 13, 2014

XAU/USD May 13 at 10:35 GMT

XAU/USD 1290.17 H: 1298.64 L: 1290.17

XAU/USD Technical

• XAU/USD has edged lower in Tuesday trade.
• 1273 continues to provide strong support.
• 1300 is the next line of resistance. Will the pair test this line? The next line of resistance is at 1315.
• Current range: 1273 to 1300

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Tuesday, reversing the trend we saw a day earlier. This is consistent with the pair, as gold prices have edged lower. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold moving higher against the US dollar.

Gold has posted slight losses on Tuesday. XAU/USD is showing little movement in the European session.

XAU/USD Fundamentals

• 11:30 US NFIB Small Business Index. Estimate 94.6 points.
• 12:30 US Core Retail Sales. Estimate 0.6%.
• 12:30 US Retail Sales. Estimate 0.5%.
• 12:30 US Import Prices. Estimate 0.4%.
• 14:00 US Business Inventories. Estimate 0.4%.

*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.