Gold Prices Jumpy as Markets Wait for ECB Asset Purchase Plan

Gold is showing movement on Thursday, as the spot price stands at $1211.28 per ounce late in the European session. On the release front, the ECB maintained the benchmark interest rate at 0.05%. The markets are waiting for Mario Draghi’s press conference, at which the ECB head is expected to discuss details of an asset-based securities program (ABS). In the US, Unemployment Claims looked solid, dropping to 287 thousand, down to 293 thousand.

Recent sharp gains by the US dollar are weighing on gold prices, as a stronger dollar diminishes the metal’s appeal as an alternative asset to the dollar. The dollar has enjoyed a spectacular September, and gold prices have tumbled over 6% during this period. With the Fed scheduled to wind up QE and attention shifting to the timing of an interest rate hike, gold could continue to move lower.

As expected, the ECB did not adjust interest rates, leaving the benchmark rate at a record low of 0.05%. The ECB is feeling the pressure to take further measures, but as Mario Draghi knows all too well, there isn’t any magic formula to creating inflation and improving economic growth. The ECB head has pledged to introduce an asset-backed securities (ABS) scheme starting this month, but the markets have low expectations, anticipating asset purchases to be modest.

In the US, ADP Nonfarm Payrolls surprised with a strong gain, climbing to 213 thousand, compared to 204 thousand in the previous release. This beat the estimate of 207 thousand. The ADP release precedes the official NFP release, which will be published on Friday. The markets are anticipating a sharp gain, with an estimate of 216 thousand. If the indicator does follow suit with a solid reading, the US dollar could post further gains against its major rivals.

On the manufacturing and housing fronts, this week’s US numbers were disappointing. ISM Manufacturing PMI fell to 56.6 points, down from 59.0 points a month earlier. US Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. On Friday, we’ll get a look at ISM Non-Manufacturing PMI, with the markets braced for a softer reading for September.

XAU/USD for Thursday, October 2, 2014

XAU/USD October 2 at 12:20 GMT

XAU/USD 1211.28 H: 1222.34 L: 1210.48

XAU/USD Technical

• XAU/USD moved higher in the Asian session, breaking past resistance at 1215. The pair then retracted and is trading below the 1215 line.
• 1186 is the next support level. 1156 is next.
• On the upside, 1215 is under strong pressure. 1240 is stronger.
• Current range: 1186 to 1215.

Further levels in both directions:

• Below: 1186, 1156, 1136 and 1101
• Above: 1215, 1240, 1252, 1275 and 1300

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions in Thursday trade. This is consistent with the pair’s movement, as gold has posted small losses. Trader sentiment remains strongly in favor of long positions, which make up most of the positions in the ratio.

XAU/USD Fundamentals

• 11:30 US Challenger Job Cuts. Actual -24.4%.
• 11:45 ECB Minimum Bid Rate. Estimate 0.05%.
• 12:30 ECB Press Conference.
• 12:30 US Unemployment Claims. Estimate 299K. Actual 287K.
• 14:00 US Factory Orders. Estimate -9.4%.
• 14:30 US Natural Gas Storage. Estimate 107B.

*Key releases are highlighted in bold

*All release times are GMT

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