XAU/USD – Solid US Numbers Send Gold to Post-Brexit Lows

Gold has posted small losses on Wednesday, as the metal trades at $1308.75 in the North American session. On the release front, US numbers were strong. The ADP Nonfarm Employment Change came in at 177 thousand, above the forecast. Pending Home Sales jumped 1.3%, well above expectations. On Thursday, the US releases unemployment claims and the ISM Manufacturing PMI.

US numbers continue to impress the markets this week. The ADP Nonfarm Employment Change was little changed in August, posting a gain of 177 thousand. This beat the forecast of 174 thousand, the third straight month the indicator has exceeded the forecast. This release precedes the all-important official Nonfarm Employment Change report on Friday. On the housing front, Pending Home Sales gained 1.3%, well above the forecast of 0.7%, marking a 3-month high. Gold dipped lower on the strong numbers, and dropped to $1304 earlier on Wednesday, its lowest level since the Brexit vote on June 24.

The US consumer remains optimistic about the economy, according to a key consumer confidence survey. CB Consumer confidence jumped to 1o1.1 points in August, above the forecast of 99.7 points. It marked the indicator’s highest level since September 2015. This sharp reading pushed gold lower by close to 1 percent on Tuesday. Recent consumer sentiment indicators have been steady, and if the optimism extends to actual consumer spending, we could see the odds of a rate hike in September or December increase.

The markets are again abuzz over a possible rate increase in 2016, following an upbeat speech from Fed chair Janet Yellen on Friday at the Jackson Hole summit. Yellen’s message to the markets was refreshingly clear, as she said that the case for a rate increase had “strengthened in recent months”. Yellen noted that the key economic indicators were performing well – the labor market was approaching maximum employment, inflation was steady, and consumer spending remained solid. Still, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. On Friday, Fed members Dennis Lockhart and Stanley Fischer both came out in favor of two rate hikes in 2016, and these comments helped the dollar record broad gains on Friday. The Fed’s stance has raised the odds of a rate move according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.

XAU/USD Fundamentals

Wednesday (August 31)

• 8:15 US ADP Non-Farm Employment Change. Estimate 174K. Actual 177K
• 9:45 US Chicago PMI. Estimate 54.1. Actual 51.5
• 10:00 US Pending Home Sales. Estimate 0.7%. Actual 1.3%
• 10:30 US Crude Oil Inventories. Estimate 1.1M. Actual 2.3M

Thursday (September 1)

• 8:30 US Unemployment Claims. Estimate 265K
• 10:00 US ISM Manufacturing PMI. Estimate 52.0

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, August 31, 2016

XAU/USD August 31 at 12:35 EDT

Open: 1312.21 High: 1316.50 Low: 1304.15 Close: 1308.75

XAU/USD Technical

• XAU/USD posted small gains in the Asian session. The pair was flat in the European session but has lost ground in North American trade
• There is strong resistance at 1331
• 1307 was tested in support earlier and could break in the North American session
• Current range: 1307 to 1331

Further levels in both directions:

• Below: 1307, 1279 and 1245
• Above: 1331, 1361, 1388 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Wednesday. Long positions have a strong majority (68%), indicative of trader bias towards XAU/USD reversing directions and moving upwards. 

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.