Gold Under Pressure Ahead of Key US Employment, Manufacturing Data

Gold prices has posted losses in Thursday trading, as the metal trades at $1272 in the European session. On the release front, there are two major events on the schedule – US Unemployment Claims and Core Durable Goods Orders. If either of these indicators catch the markets by surprise, we could see some movement from XAU/USD.

Gold has been under pressure all week. The metal dropped to a low of $1272.64 on Thursday, the lowest level we’ve seen since February. US releases in April have generally been strong, making the precious metal less attractive as a hedge against the greenback, and gold has slid from a high of $1331 in little more than a week.

In the US, New Home Sales was a disaster, as the key indicator plunged to 384 thousand in March, down from 440 thousand in the previous release. The weak reading was nowhere near the estimate of 455 thousand, and marked an eight-month low for the key housing indicator. The housing sector is showing signs of weakness, as both New Home Sales and Existing Home Sales have been on a sustained downward trend. Despite the weak housing figures, gold has failed to take advantage as the dollar has held its own.

US inflation levels have been lukewarm, but so far the Federal Reserve has done little more than point out that it would like to see inflation move closer to the Fed’s target of 2%. The House Price Index, a gauge of activity in the housing sector, rose a respectable 0.6% last month, matching the forecast. It’s a different tale in the Eurozone, where inflation continues to be persistently low and there is real concern about deflation, which could inflict serious damage on the fragile Eurozone economy. The ECB has balked at taking any action to deal with inflation, but its hand may be forced if inflation levels don’t show some life.

The markets haven’t reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his “right” to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn’t have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.

 

XAU/USD for Thursday, April 24, 2014

Forex Rate Graph 21/1/13

XAU/USD April 24 at 12:50 GMT

XAU/USD 1273.20 H: 1287.13 L: 1272.64

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1241 1260 1273 1300 1315 1330

 

  • XAU/USD has lost ground in Thursday trade. The pair dipped to a low of $1272.64 in the European session.
  • On the downside, 1273 is under strong pressure and was breached earlier in the European session. Will the break through this support level? The next support line is 1260.
  • 1300 has strengthened in resistance as the pair trades at lower levels. This is followed by resistance at 1315.
  • Current range: 1273 to 1300

Further levels in both directions:

  • Below: 1273, 1260, 1241 and 1215
  • Above: 1300, 1315, 1355, 1388 and 1403

 

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in Thursday trade. This is not consistent with the pair’s current movement, as gold continues to lose ground. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold turning directions and moving higher against the dollar.

Gold prices are down on Thursday, with sharp losses in the European session.

 

XAU/USD Fundamentals

  • 12:30 US Core Durable Goods Orders. Estimate 0.6%.
  • 12:30 US Durable Goods Orders. Estimate 2.1%.
  • 12:30 US Unemployment Claims. Estimate 309K.
  • 14:30 US Natural Gas Storage. Estimate 40B.

*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.