Gold Subdued, US Durable Goods Slip

Gold is trading quietly on Wednesday, as the spot price stands at $1069.08 per ounce in the North American session.  On the release front, it has been a busy day. Core Durable Goods Orders came in at -0.1%, while Durable Goods Orders posted a flat reading of 0.0%. New Home Sales disappointed, dropping to 490 thousand, but UoM Consumer Sentiment improved to 92.6 points.

There hasn’t been much to cheer about when it comes to gold, as the metal is on track to record another negative year in 2015. Gold took a hit in the aftermath of the Federal Reserve’s rate hike, and briefly dropped below the $1050 level, marking its lowest level since February 2010. However, gold has rallied since then, posting gains of about 2 percent. This strong performance stands in marked contrast to oil as well as the major currencies. Will gold continue to push upwards?

There were a host of US releases on Wednesday, with mixed results. Durable Goods reports were unimpressive, underscoring weakness in the US manufacturing sector. Core Durable Goods slipped by 0.1%, short of the forecast of a 0.1% gain. Durable Goods came in at 0.0%, but this beat the estimate of -0.6%. Housing numbers also disappointed, as New Home Sales dipped to 490 thousand, well off the estimate of 507 thousand. This reading comes on the heels of Existing Home Sales, which posted a weak reading of 4.76 million, its worst performance since April 2014. There was some good news from consumer indicators, as the UoM Consumer Sentiment improved to 92.6 points, above the forecast of 92.1 points and marking a 4-month high.

In a historic move, the Federal Reserve finally pressed the rate trigger at its monetary policy meeting, raising interest rates by 0.25 percent. This was the first rate hike since June 2006. The Fed dropped a broad hint in its October policy meeting about a rate hike before the end of 2015, and predictably, investors and traders were busy trying to guess whether the Fed would indeed press the rate trigger. To the credit of Fed chief Janet Yellen and her colleagues, the Fed put into place a carefully-crafted strategy, sending a steady of stream of signals that it was intending to tighten monetary policy, if economic conditions remained positive. This gave the markets ample time to price in a rate hike, and market volatility was not excessive after the US rate hike, given the fact that it was the first hike in almost 10 years. Although a hike of 0.25 percent is expected to have limited economic impact, the Fed move has given the US economy a critical vote of confidence, and this will be duly noted by the global markets. As well, this move is expected to be the first in a series of incremental rate hikes over the course of 2016, and higher interest rates means that the US dollar will become even more attractive to investors, which could spell even more trouble for commodities such as gold.

XAU/USD Fundamentals

Wednesday (Dec. 23)

• 00:50 US Personal Spending. Estimate 0.3%. Actual 0.3%
• 13:30 US Core Durable Goods Orders. Estimate 0.1%. Actual -0.1%
• 13:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
• 13:30 US Durable Goods Orders. Estimate -0.6%. Actual 0.0%
• 13:30 US Personal Income. Estimate 0.2%. Actual 0.3%
• 15:00 US New Home Sales. Estimate 507K. Actual 490K
• 15:00 US Revised UoM Consumer Sentiment. Estimate 92.1 points. Actual 92.6 points
• 15:00 US Revised UoM Inflation Expectations. Actual 2.6%
• 15:30 US Crude Oil Inventories. Estimate 1.4M. Actual -5.9M

Thursday (Dec. 24)

• 13:30 US Unemployment Claims. Estimate 270K

*Key Events are in Bold

*All release times are GMT

XAU/USD for Wednesday, December 23, 2015

XAU/USD December 23 at 18:05 GMT

XAU/USD 1069.08 H: 1081 L: 1063

XAU/USD Technical

• 1080 remains busy and has switched to a resistance line
• 1043 is providing support
• Current range: 1043 to 1080

Further levels in both directions:

• Below: 1043, 1024 and 980
• Above: 1080, 1098, 1134 and 1151

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged, reflecting the lack of significant movement from the pair. Long positions continue to command a solid majority (70%), indicative of strong trader bias towards gold prices reversing directions and moving higher.

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.