Gold Ticks Lower, Investors Eye Nonfarm Payrolls

Gold has posted small losses in the Thursday session. In North American trade, the spot price for an ounce of gold is $1343.22, down 0.14% on the day. On the release front, employment data was positive, as unemployment claims dropped to 230 thousand, below the forecast of 237 thousand. ISM Manufacturing PMI slowed to 59.1, but still beat the estimate of 58.7 points. ISM Manufacturing PMI slowed to 59.1, but still beat the estimate of 58.7 points. On Friday, the spotlight will be on employment numbers, with the release of wage growth, nonfarm payrolls and the unemployment rate. As well, the US releases UoM Consumer Sentiment.

As expected, the Federal Reserve held the course on interest rate policy at its January meeting on Wednesday. In the rate statement, policymakers said that they expected the economy to continue to expand at a moderate pace and that the labor market would remain strong in 2018. What was more noteworthy was that the Fed predicted that inflation would rise to the Fed’s 2 percent target this year. This marks an upgrade in the inflation forecast, as the December statement said that inflation was expected to “remain somewhat below 2 percent.” Higher inflation is likely to open the door to tighter monetary policy, and the Fed appears on track for three or even four rate hikes in 2018, assuming that the US economy remains strong. This policy meeting was the last under Janet Yellen, as Jerome Powell will take over as Fed chair on February 3. The slightly hawkish tone of the rate statement has raised the odds of a rate hike to 83% when the Fed next meets in March.

Gold posted gains last week, taking advantage of a USD sell-off. However, the dollar has steadied this week, and gold prices are slightly lower. Since the start of the year, gold is up 2.2%, joining the major currencies which have posted gains against the greenback in 2018. This has been somewhat of a surprise, as the robust US economy has supported risk appetite, yet gold has not lost its luster early in 2018. Last week, gold climbed to $1366, its highest level since August 2016.

XAU/USD Fundamentals

Thursday (February 1)

• 7:30 US Challenger Job Cuts. Actual -2.8%
• 8:30 US Preliminary Nonfarm Productivity. Estimate +0.8%. Actual -0.1%
• 8:30 US Preliminary Unit Labor Costs. Estimate 0.9%. Actual 2.0%
• 8:30 US Unemployment Claims. Estimate 237K. Actual 230K
• 9:45 US Final Manufacturing PMI. Estimate 55.5. Actual 55.5
• 10:00 US ISM Manufacturing PMI. Estimate 58.7. Actual 59.1
• 10:00 US Construction Spending. Estimate 0.4%. Actual 0.7%
• 10:00 US ISM Manufacturing Prices. Estimate 68.3. Actual 72.7
• 10:30 US Natural Gas Storage. Estimate -102B. Actual -99B
• All Day – US Total Vehicle Sales. Estimate 17.2M

Friday (February 2)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 181K
• 8:30 US Unemployment Rate. Estimate 4.1%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 95.0

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, February 1, 2018

XAU/USD February 1 at 12:30 EST

Open: 1349.76 High: 1352.12 Low: 1352.50 Close: 1343.22

XAU/USD Technical

• XAU/USD showed little movement in the Asian session. The pair posted slight losses in European trade, but has recovered most of these losses in North American trade
• 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 majority (59%), indicative of trader bias towards XAU/USD continuing to move lower.

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.