Gold – Slight Losses As Federal Reserve in Spotlight

Gold has posted modest losses in Wednesday trading. The spot price for the metal is at $1304.70 in the North American session. The crisis in the Ukraine continues to be in the spotlight. In economic news, the markets are keeping a close eye on the Federal Reserve, which will release the minutes of its last policy meeting later in the day.

The Federal Reserve will be front stage and center on Wednesday, as the markets await the releases of the minutes of its most recent policy meeting. Last week, Fed chair Janet Yellen sounded dovish in her outlook on the US economy, saying that inflation and employment levels needed to improve and monetary stimulus would continue for some time. So it shouldn’t be a surprise if the minutes state that the US still has a long way to go on the road to recovery. If the minutes don’t paint an upbeat picture of the US economy, the dollar could lose some ground. Currently, the Fed is purchasing $55 billion in assets each month under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence, which would possibly force the Fed to delay further tapers. As the tapers are dollar-positive, any delay would be bearish for the greenback.

Gold often moves higher as a result of geopolitical turmoil, as investors turn to the safe-haven commodity in times of trouble. Increasing tensions between the US and Russia over the fluid situation in Ukraine has boosted gold, which was trading at $1281 just over a week ago. Ukrainian forces continue to surround pro-Russian demonstrators, who have taken over government buildings in two cities in the eastern part of the country and declared their independence. Russia has warned the Ukraine not to react with force, while the US has accused Russia of continuing to foment unrest in the Ukraine ahead of elections in May. The tense situation could easily spill out of control and this could lead to a negative reaction from the markets.

On Friday, US Nonfarm Payrolls improved nicely, climbing to 192 thousand, compared to 175 thousand a month earlier. However, the markets were looking for more, with the estimate standing at 199 thousand. The Unemployment Rate also fell short of the estimate, as it remained unchanged at 6.7%. Although these numbers were not as strong as hoped, the Federal Reserve is expected to continue trimming QE when it meets at the end of April. These tapers mark a vote of confidence in the US economy by the Federal Reserve, and are dollar-positive.

 

XAU/USD for Wednesday, April 9, 2014

Forex Rate Graph 21/1/13

XAU/USD April 9 at 16:10 GMT

XAU/USD 1304.70 H: 1314.00 L: 1304.70

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1241.75 1260.98 1273.78 1312.62 1338.98 1355.80

 

  • XAU/USD has posted slight losses on Wednesday. The pair dipped to a low of $1300.85 earlier in the North American session but has bounced higher.
  • 1273.78 continues to provide support. This is followed by a support level at 1260.98.
  • 1312.62 is the next line of resistance. This line was briefly breached by the pair for the second day in a row. It is followed by strong resistance at 1338.98.
  • Current range: 1273.78 to 1312.62

Further levels in both directions:

  • Below: 1273.78, 12.60.98, 1241.75 and 1215.64
  • Above: 1312.62, 1338.98, 1355.80 and 1388.54

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in long positions in Wednesday trading. This is not consistent with what we are seeing from the pair, as gold has posted slight losses against the dollar. XAU/USD ratio is made up of an overwhelming majority of long positions, reflecting a strong trader bias towards gold moving higher against the US currency.

Gold continues to trade above the key $1300 level on Wednesday. XAU/USD has edged higher in the North American session.

 

XAU/USD Fundamentals

  • 14:00 US Wholesale Inventories. Estimate 0.5%. Actual 0.5%.
  • 14:30 US Crude Oil Inventories. Estimate 1.0M. Actual 4.0M.
  • 17:01 US 10-year Bond Auction.
  • 18:00 US FOMC Meeting Minutes.
  • 23:00 US FOMC Member Daniel Tarullo Speaks.

*Key releases are highlighted in bold

*All release times are GMT

 

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.