Gold Subdued as Yellen Speech in Focus

Gold has posted small gains on Tuesday, trading at a spot price of $1226.60 an ounce in the North American session. In economic news, US CB Consumer Confidence beat expectations, posting a strong reading of 96.2 points. Today’s highlight is a speech from Federal Reserve Janet Yellen at the Economic Club in New York City.

Consumer confidence levels are closely linked to consumer spending, so the markets were pleased with a strong CB Consumer Confidence reading. The key indicator jumped to 96.2 points, well above the estimate of 93.9 points. The positive news was especially timely, coming on the heels of two soft consumer indicators, Core PCE Price Index and Personal Spending. Both releases softened in February, posting weak gains of 0.1 percent. The market focus will quickly shift to employment numbers, with the US releasing the ADP Nonfarm Payrolls on Wednesday, ahead of the official Nonfarm Payrolls report on Friday.

The Federal Reserve’s recent policy statement seemed to pour could water on an interest rate hike next few months, but things have dramatically changed since then. A flurry of hawkish statements from Federal Reserve members last week has raised market-implied probability of a hike in April and resulted in broad gains for the dollar. The markets will be looking for some guidance from Fed chair Janet Yellen, who will make a speech in New York later on Tuesday. Will Yellen rule out an April move? If not, speculation over an imminent rate hike will heat up and the US dollar could respond with broad gains.

US economic growth in the fourth quarter was respectable, but there are signs that we could see softer numbers for the first quarter of 2016. The Atlanta Fed downgraded its forecast for Q1 from 1.4 percent to 0.6 percent. The original forecast, released just last week, was lowered in response to a downgraded forecast of personal income and outlays by the US Bureau of Economic Analysis. US Final GDP for the fourth quarter rose 1.4 percent, above the estimate of 1.0 percent, but lower than the 2.0 percent gain in the third quarter. If US economic activity did in fact weaken in Q1, we could see the US dollar lose ground.

XAU/USD Fundamentals

Tuesday (March 29)

• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%. Actual 5.7%
• 10:00 US CB Consumer Confidence. Estimate 93.9. Actual 96.2
• 12:20 US Federal Reserve Chair Janet Yellen Speaks

Upcoming Key Events

Wednesday (March 30)

• 12:15 ADP Nonfarm Employment Change. Estimate 194K

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Tuesday, March 29, 2016

XAU/USD March 29 at 12:00 DST

Open: 1222.67 Low: 1215.34 High: 1229.01 Close: 1226.60

XAU/USD Technical

• XAU/USD was flat in the Asian and European sessions. The pair has posted slight gains in North American trade
• 1205 is providing support
• 1232 is a weak resistance line and could be tested in the North American session
• Current range: 1205 to 1232

Further levels in both directions:

• Below: 1205, 1191 and 1169
• Above: 1232, 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement this week. Long positions have a strong majority (63%), indicative of trader bias towards gold continuing to move upwards.

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.