Gold Under Pressure, Unemployment Claims Shine

Gold has posted losses on Wednesday, as the metal trades at a spot price of $1070.83 at the start of the North American session. In the US, there are a host of releases ahead of the Thanksgiving holiday. Unemployment Claims plunged to 260 thousand, much better than the estimate of 273 thousand. There was more good news from Core Durable Goods, which rebounded with a strong gain of 0.5%, matching the forecast. Later in the day, we’ll get a look at a key consumer indicator, UoM Consumer Sentiment. The markets are expecting an strong surge in the October report, with an estimate of 93.2 points.

There were no surprises from US Preliminary GDP in the third quarter. The revised GDP report came in at 2.1%, very close to the Advanced GDP reading of 2.0%. Although these numbers pale in comparison to the blistering 3.7% we saw in Q2, they nonetheless point to respectable growth by the US economy in a difficult global environment. Meanwhile, Consumer Confidence slipped badly, dropping to 90.4 points, compared to 97.6 points a month earlier. This was well off the estimate of 99.3 points, and marked the indicator’s weakest showing in 12 months. However, US consumers appear to be spending, as Core Durable Goods and Durable Goods posted strong readings for October.

The guessing game continues regarding a rate move by the Federal Reserve, which would be the first such step in 10 years. The Fed hinted at a rate hike in its October policy statement, and the markets have been abuzz ever since. Last week, New York Fed President William Dudley said there is a “strong case” for a rate hike in December as long as economic data remains strong. At the past two policy meetings, the vote against a rate hike was 9-1, but that clearly will not be the outcome at the December meeting. With the US economy showing improvement and employment and consumer indicators pointing upwards, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that modest, incremental moves would not cause unwanted turbulence on the global markets. One fly in the ointment is that of persistently weak inflation levels, as the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. With the critical Fed meeting only a few weeks away, every key indicator and comment from a Fed member will be under close scrutiny from the markets.

The economic slowdown in China and other emerging countries continues to affect markets worldwide, and one of the damaging results has been a sharp decline in commodity prices, including base metals such as gold. Somewhat surprisingly, gold has not been able to capitalize on its traditional reputation as a safe-haven in times of trouble, despite the attacks in Paris and terror alerts in France and other European countries. The precious metal has plunged since mid-October, losing some 9 percent of its value.

XAU/USD Fundamentals

Wednesday (Nov. 25)

• 13:30 US Core Durable Goods Orders. Estimate 0.5%. Actual 0.5%
• 13:30 US Unemployment Claims. Estimate 273K. Actual 260K
• 13:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.0%
• 13:30 US Durable Goods Orders. Estimate 1.6%. Actual 3.0%
• 13:30 US Personal Spending. Estimate 0.3%. Actual 0.1%
• 13:30 US Personal Income. Estimate 0.4%. Actual 0.4%
• 14:00 US HPI. Estimate 0.5%.
• 14:45 US Flash Services PMI. Estimate 55.2 points
• 15:00 US New Home Sales. Estimate 500K
• 15:00 US Revised UoM Consumer Sentiment. Estimate 93.2 points
• 15:00 US Revised UoM Inflation Expectations
• 15:30 US Crude Oil Inventories. Estimate 1.2M
• 17:00 US Natural Gas Storage. Estimate 5B

*Key releases are highlighted in bold

*All release times are GMT

XAU/USD for Wednesday, November 25, 2015

XAU/USD November 25 at 13:30 GMT

XAU/USD 1070 H: 1080 L: 1073

XAU/USD Technical

• XAU/USD posted slight gains in the Asian session but was unable to consolidate and lost ground in the European session.
• On the upside, 1080 was tested earlier and is under pressure.
• 1043 remains a strong support level.
• 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 showing little movement. Long positions continue to make up a strong majority (77%), indicative of strong trader bias towards gold prices reversing directions and moving to higher levels.

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.