XAU/USD – Gold Falls to 2-week Low as Slide Continues, GDP Looms

Gold has posted losses on Thursday, continuing the downward direction which has marked most of this week. In North American trade, the spot price for one ounce is $1187.22, as the metal trades at its lowest level since January 11. On the release front, US unemployment claims jumped to 259 thousand, well above the forecast of 247 thousand. New Home Sales also disappointed, dropping to 536 thousand. This was much lower than the estimate of 585 thousand. On Friday, the US releases Advance GDP, with the estimate standing at 2.1%.

As the markets try to decipher Donald Trump’s economic platform, we could see more volatility from gold prices. Trump has barely warmed up the presidential chair in the Oval Office, but he has wasted no time in advancing a protectionist stance. The week started with Trump signing an executive order formally withdrawing the US from the Trans-Pacific Partnership, a broad trade agreement that was to cover some 40 percent of global GDP. Trump had promised to leave the TPP during the election, arguing that the deal would hurt American workers. NAFTA could be Trump’s next target, as Trump wants to renegotiate the deal with Canada and Mexico. Trump has threatened to impose tariffs on companies that move production to Mexico and declared he will build a wall between the two countries. Predictably, these protectionist measures are raising concerns in the markets that US economic growth could drop if the US takes an isolationist stance towards global trade, and such a stance could sour market sentiment and lead to volatility in the markets. If America’s trade partners choose to retaliate against Trump’s moves, this could lead to a trade war in which there are no winners. 

Mexico Could Pull Out of NAFTA if Renegotiation Unfavorable

After U.S Exit, Asian Nations Try to Save TPP

XAU/USD Fundamentals

Thursday (January 26)

• 8:30 US Unemployment Claims. Estimate 247K. Actual 259K
• 8:30 US Goods Trade Balance. Estimate -64.5B. Actual -65.0B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.9%. Actual 1.0%
• 9:45 US Flash Services PMI. Estimate 54.4. Actual 55.1
• 10:00 US New Home Sales. Estimate 585K. Actual 536K 
• 10:00 US CB Leading Index. Estimate 0.5%. Actual 0.5%
• 10:30 US Natural Gas Storage. Estimate -121B. Actual -119B

Upcoming Key Releases

Friday (January 27)

• 8:30 US Advance GDP. Estimate 2.1%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 10:00 Revised UoM Consumer Sentiment. Estimate 98.2

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, January 26, 2017

XAU/USD January 26 at 13:00 EST

Open: 1200.97 High: 1202.60 Low: 1184.36 Close: 1187.22

XAU/USD Technical

• XAU/USD edged lower in the Asian session and recorded stronger losses in European trade. The pair is steady in the North American session
• 1174 is providing support
• 1199 is the next resistance line
• Current range: 1174 to 1199

Further levels in both directions:

• Below: 1174, 1146 and 1130
• Above: 1199, 1232, 1260 and 1285

OANDA’s Open Positions Ratio

XAU/USD ratio has shown limited movement this week. Long positions have a strong majority (68%), indicative of trader bias towards XAU/USD reversing directions and climbing to higher levels.

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