Gold Steady As Inflation Data Meets Expectations

Gold has edged lower in Friday trade, as the spot price stands at $1293.26 per ounce in the European session. On Thursday, US inflation numbers came in as expected, as Core CPI and CPI posted slight gains. Unemployment Claims were excellent, dropping to their lowest level in seven years. Today’s highlights are Building Permits and the Preliminary UoM Consumer Sentiment.

Low inflation levels have 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. Core CPI posted a weak gain of 0.2% in April, edging above the estimate of 0.1%. Earlier in the week, Core PPI posted a gain of 0.5%, beating the estimate of 0.2%.

Although inflation numbers have not impressed, employment and manufacturing numbers looked sharp on Thursday. Unemployment Claims were outstanding, dropping to 297 thousand last week. This easily beat the estimate of 321 thousand and was the lowest level we’ve seen since May 2007.  On the manufacturing front, the Philly Fed Manufacturing Index dipped to 15.4 points, but this was well above the estimate of 13.9 points. As well, Empire State Manufacturing Index climbed to 19.0 points, crushing the estimate of 5.5. This was the indicator’s best showing in two years.

The crisis in Ukraine shows no sign of letting up, as pro-Russian separatists held referendums last Sunday and declared self-rule after the vote. The Ukrainian 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 for 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. In an ominous development, Russian Foreign Minister Sergei Lavrov warned that Ukraine was “as close to civil war as you can get”. If hostilities worsen, we can expect gold prices to climb.

XAU/USD for Friday, May 16, 2014

XAU/USD May 16 at 9:45 GMT

XAU/USD 1294.07 H: 1298.26 L: 1291.89

XAU/USD Technical

• XAU/USD has dropped back below the 1300 line.
• 1280 is providing support. This is followed by support at 1275.
• 1300 has reverted back to a resistance role. 1315 is stronger.
• Current range: 1280 to 1300.

Further levels in both directions:

• Below: 1280, 1275, 1260 and 1252
• Above: 1300, 1315, 1330, 1350 and 1388

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in long positions on Friday, reversing the trend we’ve seen for most of the week. This is not consistent with the pair’s movement, as gold has edged lower. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold gaining ground against the US dollar.

Gold is steady after US inflation numbers came in as expected. XAU/USD is unchanged in the European session.

XAU/USD Fundamentals

• 12:30 US Building Permits. Estimate 1.o1M.
• 12:30 US Housing Starts. Estimate 0.98M.
• 13.55 US Preliminary UoM Consumer Sentiment. Estimate 84.7 points.
• 13:55 US Preliminary UoM Consumer Expectations.

*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.