XAU/USD – Gold Drops, US Jobless Claims Disappoint

Gold has dipped lower on Thursday, as the metal trades at a spot price of $1333.26 per ounce in the North American session. On the release front, unemployment claims climbed to 266 thousand, higher than the estimate of 261 thousand. On Friday, the US will publish Advance GDP, with the markets expecting a strong expansion of 2.6%. We’ll also get a look at UoM Consumer Sentiment, which is expected to drop to 90.3 points.

Gold prices climbed 1.5 percent on Wednesday, as the Federal Reserve stayed on the sidelines at its policy meeting. The bank continued to hold the course on interest rates, maintaining levels at 0.25% in a 9-1 vote. The Fed statement sounded upbeat, saying that risks to the economy have receded and the employment market is getting tighter. The Fed added that it continues to monitor inflation levels and noted that the housing sector had improved. Will the Fed make a move and raise rates in September? It appears that the Fed could go either way, and policymakers will make a decision at the September meeting based on the strength of US data. This means that key US numbers, such as Friday’s Advance GDP report, will be under the market microscope, and unexpected readings could lead to strong volatility in the currency markets.

We could see some further volatility from gold following the BoJ policy meeting on Thursday. The BoJ has been under strong pressure to adopt further easing steps, but does it have any monetary ammunition left? Interest rates are already down to zero, and the economy continues to struggle with deflation. Other options available to the bank include expanding quantity or quality easing. The BoJ will issue a policy statement at the conclusion of the meeting, and it remains unclear if the bank will adopt further easing measures. If the bank does make a move, we could see gold prices move higher.

XAU/USD Fundamentals

Thursday (July 28)

• 8:30 US Unemployment Claims. Estimate 261K. Actual 266K
• 10:30 US Natural Gas Storage. Estimate 29B. Actual 17B

Upcoming Key Events

Friday (July 29)

• 8:30 US Advance GDP. Estimate 2.6%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.2

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Thursday, July 28, 2016

XAU/USD July 28 at 12:20 EDT

Open: 1339.68 High: 1345.72 Low: 1333.07 Close: 1333.28

XAU/USD Technical

• XAU/USD showed limited movement in the Asian and European sessions. The pair has posted considerable losses in North American trade.
• 1331 is under strong pressure in support. It could break during the North American session
• 1361 is a strong resistance line
• Current range: 1331 to 1361

Further levels in both directions:

• Below: 1331, 1307, 1279 and 1255
• Above: 1361, 1388 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio has shown slight movement towards short positions. Long positions have a strong majority (67%), indicative of trader bias towards XAU/USD reversing directions and gaining ground. 

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.