Gold Steady on Mixed US Consumer Reports

Gold is showing little movement on Tuesday, trading at a spot price of $1213.30 an ounce in the North American session. In economic news, CB Consumer Confidence dipped to 92.6 points, well short of the estimate. Personal Spending climbed 1.0%, beating the estimate. On Wednesday, the US releases ISM Manufacturing PMI, a key indicator.

US consumer numbers were a mixed bag on Tuesday. CB Consumer Confidence, a major indicator, dropped to 92.6 points, well off the forecast of 96.1 points. This was the indicator’s weakest reading in three months. There was better news from Personal Spending, which jumped 1.0% in April. This beat the forecast of 0.7% and marked the indicator’s strongest gain since 2009. On Friday, Preliminary GDP, which can be viewed as an economic report card, posted a gain of 0.8%, in the first quarter, matching the forecast. This was an improvement from Advanced GDP, which came in at 0.5%. Still, the US economy slowed down considerably compared to the fourth quarter of 2015. The export sector has been hurt by the strong US dollar and weak global demand. Oil prices remain low, which has taken a sharp toll on the oil industry. Elsewhere, the UoM Consumer Sentiment report improved in April, climbing to 94.7 points. This marked the indicator’s highest level in 11 months, although it was short of the estimate of 95.7 points.

Gold prices are sensitive to interest rate levels, so renewed speculation about a rate hike by the Federal Reserve continues to weigh on gold prices. The metal is struggling to stay above the symbolic $1200 level. The metal has slipped 6.9% in May, as recent comments by Federal Reserve chair Janet Yellen and other Fed policymakers have strongly hinted that a rate hike is on the table this summer. On Friday, Yellen said that if the US economy continued to improve, a rate hike would be appropriate in the “coming months”. This was followed by St. Louis Reserve President James Bullard, who said on Monday that global markets were “well prepared” for a summer interest rate rise, although he didn’t provide any specific dates. Odds of a rate hike in June have sharply increased, but the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. Last week, FOMC member John Williams reiterated that he expected the Fed to raise rates two or three times in 2016. However, there appears to be a gap between the hawkish message some FOMC members are sending out and market sentiment, as many analysts are projecting only one rate hike this year. The guessing game as to what the Fed has in mind is likely to continue into June, but it’s safe to say that another rate move will be data-dependent, so stronger US numbers will increase the likelihood of a quarter-point hike at the June policy meeting.

XAU/USD Fundamentals

• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.7%. Actual 1.0%
• 8:30 US Personal Income. Estimate 0.4%. Actual 0.4%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.1%. Actual 5.4%
• 9:45 US Chicago PMI. Estimate 50.8
• 10:00 US CB Consumer Confidence. Estimate 96.1. Actual 92.6 points

Wednesday (June 1)

• 14:00 US ISM Manufacturing PMI. Estimate 50.5

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, May 31, 2016

XAU/USD May 31 at 12:00 EDT

Open: 1209.84 Low: 1208.35 High: 1216.27 Close: 1213.30

XAU/USD Technical

• XAU/USD has shown limited movement in the Tuesday session
• 1207 remains fluid and has switched to a support role. It could see further action in the North American session
• There is resistance at 1232
• Current range: 1207 to 1232

Further levels in both directions:

• Below: 1207, 1191, 1164 and 1130
• Above: 1232, 1255 and 1279

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement on Tuesday, consistent with the lack of movement from XAU/USD. Long positions maintain a strong majority (70%), indicative of trader bias towards XAU/USD breaking out and moving 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.