Gold Prices Dip As Markets Eye Federal Reserve Announcement

Gold prices have softened in Tuesday trading, with a spot price of $1290 in the European session. The markets are expecting the Federal Reserve to trim QE by another $10 billion, which could give a boost to the US dollar. Today’s highlight is CB Consumer Confidence. The markets are expecting another strong reading in the upcoming release.

US housing numbers were on the weak side last week, but it was a different story on Monday, as Pending Home Sales soared in March. The key indicator jumped 3.4%, easily beating the estimate of 1.0%. This marked its biggest monthly gain since last May. The indicator has posted mostly declines in recent readings, so the strong gain was welcome news. Meanwhile, US consumers appear to be content, as the UoM Consumer Sentiment jumped to 84.1 points in March, beating the estimate of 83.2. It marked the indicator’s highest level since June. If the optimism continues and translates into increased consumer spending, this should bode well for the US economy.

US economic releases have been generally strong, although recent employment data has been softer than expected. The Federal Reserve is expected to trim QE by another $10 billion on Wednesday, which would reduce the asset purchase program to $45 billion each month. Continuing tapers represent a vote of confidence in the economy by the Fed, and this event is dollar-positive. So we could see gold prices remain at current levels or even lose ground if the Fed does cut QE.

Gold has benefitted from continuing trouble in Ukraine, as nervous investors look to the metal as a safe-haven for their assets. The metal climbed above $1300 on Friday. Talks between the West and Russia over the Ukraine crisis have bogged down, and the US and EU is expected to slap new sanctions on Russia. Pro-Russian rebels have taken over some strategic positions in eastern Ukraine and have clashed with Ukrainian government forces. With thousands of Russian troops conducting drills on the border with Ukraine, the situation is very tense and could deteriorate very quickly.

 

XAU/USD for Tuesday, April 29, 2014

Forex Rate Graph 21/1/13

XAU/USD April 29 at 11:45 GMT

XAU/USD 1290.52 H: 1296.73 L: 1286.32

 

XAU/USD Technical

S3

S2

S1

R1

R2

R3

1252

1260

1273

1300

1315

1330

 

  • XAU/USD has lost ground in Tuesday trade.
  • 1273 is providing support. This is followed by a support level at 1260.
  • 1300 has switched to a resistance role as XAU/USD trades at lower levels. This is followed by resistance at 1315.
  • Current range: 1300 to 1315

Further levels in both directions:

  • Below: 1273, 1260, 1252 and 1241
  • Above: 1300, 1315, 1330, 1350 and 1388

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions in Tuesday trade, continuing the trend seen a day earlier. This is consistent with the pair’s current movement, as gold has moved lower. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold reversing directions and posting gains.

Gold is trading at $1290 on Tuesday. XAU/USD is unchanged in the European session.

 

XAU/USD Fundamentals

  • 13:00 US S&P/CS Composite-20 HPI. Estimate 12.9%.
  • 14:00 US CB Consumer Confidence. Estimate 82.9 points.

*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.