Gold Trading Sideways After Trump Bombshell

Gold is trading sideways in the Wednesday session. In North American trade, the spot price for an ounce of gold is $ 1313.48, down 0.08% on the day. On the release front, producer price inflation reports were soft. PPI dropped to 0.1%, shy of the estimate of 0.2%. Core PPI edged lower to 0.2%, matching the forecast. The focus remains on inflation on Thursday, as the US releases consumer inflation reports.

US President Trump delivered a major speech on Tuesday, announcing that the US would withdraw from the Iran nuclear deal. The bombshell announcement did not impact on gold prices, as demand for safe-haven assets remains muted. In his televised remarks, Trump blasted the agreement and said that the US would reimpose stiff sanctions on Iran. However, Britain, France and Germany have said they plan to remain in the deal, and will be holding a high-level meeting with Iranian leaders on how the agreement can be salvaged. With the US acknowledging that the White House does not have a ‘Plan B’, it’s unclear what happens next. Meanwhile, tensions between Israel and Iran are at a fever pitch, and any confrontation between the two could shake up the markets and send gold prices upwards.

The Federal Reserve’s newest regional Fed president, Thomas Barkin, delivered a major speech on Monday, and his tone was decidedly upbeat. Barkin said that the economy is “remarkably strong: above-trend growth, low unemployment, inflation at target”. Barkin added that although the labor market is strong, it is not causing pressure on wages, but low unemployment should lead to an increase in inflationary pressures. As for upcoming rate increases, Barkin was careful to remain mum on how many rate hikes he expects this year. The Fed raised rates in March by a quarter-point and continues to forecast two additional increases this year. However, some policymakers are calling for three more hikes, given the strong health of the US economy.

XAU/USD Fundamentals

Wednesday (May 9)

• 8:30 US PPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.2%
• 10:00 US Final Wholesale Inventories. Estimate 0.6%. Actual 0.3%
• 10:30 US Crude Oil Inventories. Estimate -0.2M
• 13:01 US 10-year Bond Auction

Thursday (May 10)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 219K

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, May 9, 2018

XAU/USD May 9 at 12:10 DST

Open: 1315.60 High: 1319.01 Low: 1301.85 Close: 1313.48

XAU/USD Technical

• XAU/USD edged lower in the Asian session. In European trade, the pair posted further losses but then recovered. XAU/USD is showing little movement in North American trade
• 1307 was tested earlier in support
• 1337 is the next resistance line
• Current range: 1307 to 1337

Further levels in both directions:

• Below: 1307, 1285, 1260 and 1236
• Above: 1337, 1375 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Wednesday session. Currently, long positions have a majority (71%), indicative of trader bias towards XAU/USD reversing directions and moving 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.