Gold Volatility Continues Over Trump Tariff Threat

Gold has posted sharp losses in the Wednesday session, erasing much of the gains seen on Tuesday. In North American trade, the spot price for an ounce of gold is $1324.71, down 0.75% on the day. In economic news, there was positive news on the labor front, as ADP Nonfarm Payrolls report ticked higher to 235 thousand, easily beating the estimate of 199 thousand. On Thursday, the US releases unemployment claims.

Gold prices continue to show strong fluctuation, as the markets remain focused on President Trump’s threat to impose heavy tariffs on imported steel. The announcement has infuriated US trading partners, as well as sharp criticism from senior Republican lawmakers. There was further drama on Tuesday, as Gary Cohen, Trump’s economic adviser, resigned. Cohen was a strong advocate of free trade, so his resignation could weaken opposition in the White House to the tariffs. Gold posted strong gains on Tuesday, but has given up much of these gains on Wednesday. Will Trump make good on his threat or back off? Until the situation is resolved, traders should be prepared for continuing volatility from gold.

Good news on the employment front translated into losses for gold on Wednesday. The ADP nonfarm payrolls report, which precedes the official nonfarm payrolls report on Friday, ticked upwards to 235 thousand, up from 234 thousand a month earlier. This easily beat expectations, boosting investor risk appetite. The nonfarm payrolls report is also expected to remain steady, and if the indicator can again beat expectations, gold prices would likely head lower.

XAU/USD Fundamentals

Wednesday (March 7)

• 8:00 US FOMC Member Raphael Bostic Speaks
• 8:15 US ADP Nonfarm Employment Change. Estimate 199K. Actual 235K
• 8:20 US FOMC Member William Dudley Speaks
• 8:30 US Revised Nonfarm Productivity. Estimate -0.1%. Actual 0.0%
• 8:30 US Revised Unit Labor Costs. Estimate 2.1%. Actual 2.5%
• 8:30 US Trade Balance. Estimate -55.1B. Actual -56.6B
• 10:30 US Crude Oil Inventories. Estimate 2.6M. Actual 2.4M
• 14:00 US Beige Book
• 15:00 US Consumer Credit. Estimate 17.5B

Thursday (March 8)

• 8:30 US Unemployment Claims. Estimate 220K

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, March 7, 2018

XAU/USD March 7 at 12:50 EST

Open: 1334.72 High: 1340.60 Low: 1322.82 Close: 1324.71

XAU/USD Technical

• XAU/USD posted small gains but the retracted in the Asian session. The pair was flat in the European session and has posted losses in North American trade
• 1307 is providing support
• 1337 is the next resistance line
• Current range: 1307 to 1337

Further levels in both directions:

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

OANDA’s Open Positions Ratio

The XAU/USD ratio is slight movement towards short positions. Currently, long positions have a majority (54%). This is indicative of trader bias towards XAU/USD 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.