Gold Takes Breather, Investors Await GDP, Durable Goods

Gold has posted small gains in the Thursday session. In North American trade, the spot price for an ounce of gold is $1360.31, up 0.15% on the day. On the release front, US numbers were mixed. Unemployment claims climbed to 233 thousand, but managed to beat the estimate of 236 thousand. New Home Sales slowed to 625 thousand, well off the estimate of 679 thousand.  On Friday, there are two key releases in the US – Advance GDP for the fourth quarter and durable goods reports.

It’s been a good week for gold, which has climbed 2.1% this week. Gold prices touched $1360 earlier on Thursday, its highest level since August 2017. The US dollar selloff has continued on Thursday, although gold prices are steady. On Wednesday, comments from US Treasury Secretary Steven Mnuchin put more pressure on the dollar,. Mnuchin, who is attending the World Economic Forum in Davos, said that the US was comfortable with a low dollar for the short term. As well, negative sentiment over global equity markets this week has increased demand for safe haven assets, such as gold and the Japanese yen. Traders should be prepared for more movement from gold on Friday, as the US releases Advance GDP, which is expected to show a strong gain of 3.0%.

There will be a changing of the guard next month at the Federal Reserve, as Jerome Powell is set to replace Janet Yellen as chair of the powerful central bank. On Tuesday the Senate confirmed Jerome Powell as the next head of the Fed. The vote of 84-13 was a cakewalk, reflecting strong bipartisan support for Powell. The new chair is expected to continue Yellen’s monetary stance, which was marked by small, incremental rate hikes during a period of economic expansion. The Fed has started to trim its massive balance sheet, another vote of confidence in the strength of the economy. At the same time, Fed policymakers are divided over how to approach inflation, which remains below the Fed target of 2 percent, despite a strong economy and a red-hot labor market. The markets will be watching to see how the Fed, under Powell’s watch, responds to recent tax reform legislation, which is sure to have a significant impact on the US economy.

XAU/USD Fundamentals

• 8:30 US Unemployment Claims. Estimate 236K. Actual 233K
• 10:00 US New Home Sales. Estimate 679K. Actual 625K
• 10:00 US CB Leading Index. Estimate 0.5%. Actual 0.6%
• 10:30 US Natural Gas Storage. Estimate -270B. Actual -288B

Friday (January 26)

• 8:30 US Advance GDP. Estimate 3.0%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Advance GDP Price Index. Estimate 2.3%
• 8:30 US Durable Goods Orders. Estimate 0.9%

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, January 25, 2018

XAU/USD January 25 at 12:05 EST

Open: 1358.54 High: 1366.11 Low: 1353.58 Close: 1360.31

XAU/USD Technical

• XAU/USD posted gains in the Asian session but gave up most of these gains in European trade. XAU/USD has recorded small gains in the North American session
• 1337 is providing support
• 1375 is the next line of resistance
• Current range: 1337 to 1375

Further levels in both directions:

• Below: 1337, 1307, 1285 and 1260
• Above: 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Thursday session. Currently, short positions have a slim majority (52%), indicative of slight trader bias towards XAU/USD reversing directions and moving to lower ground.

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.