Gold Under Pressure Ahead of Federal Reserve Announcement

Gold prices is steady in Wednesday trading, with a spot price of $1291 in the European session. The Federal Reserve will issue a policy statement later in the day, and if the Fed trims QE by another $10 billion, the US dollar could get a boost. There’s plenty of other action out of the US, with two key releases on the schedule – ADP Nonfarm Payrolls as well as Advance GDP. The markets are expecting a strong release from the ADP Nonfarm Payrolls, but Advance GDP is expected to decline in the March reading.

The markets are keeping a close eye on the Federal Reserve, which will issue a policy statement later in the day. The Fed is expected to trim QE by another $10 billion, which would reduce the asset purchase scheme to $45 billion. If US numbers remain steady, the Fed plans to wind up QE before the end of 2014, at which time the guessing game of when interest rates might rise will begin in earnest. Meanwhile, further tapers to QE represent a vote of confidence in the US economy, so the greenback could post gains against the major currencies following another trim.

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.

Gold has benefited from continuing trouble in Ukraine, as nervous investors look to the metal as a safe-haven for their assets. The metal climbed above the $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 Wednesday, April 30, 2014

Forex Rate Graph 21/1/13

XAU/USD April 30 at 11:35 GMT

XAU/USD 1291.07 H: 1296.48 L: 1289.46

 

XAU/USD Technical

S3

S2

S1

R1

R2

R3

1252

1260

1273

1300

1315

1330

 

  • XAU/USD is steady in Wednesday trade.
  • 1273 is providing support to the pair. This is followed by a support level at 1260.
  • 1300 continues to provide resistance. This is followed by resistance at 1315.
  • Current range: 1273 to 1300

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 long positions in Wednesday trade, reversing the trend seen a day earlier. This is not consistent with the pair’s current movement, as gold has edged 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 quietly on Wednesday. XAU/USD has edged lower in the European session.

 

XAU/USD Fundamentals

  • 12:15 US ADP Nonfarm Employment Change. Estimate 203K.
  • 12:30 US Advance GDP. Estimate 1.2%.
  • 12:30 US Advance GDP Price Index. Estimate 1.6%.
  • 12:30 US Employment Cost Index. Estimate 0.5%.
  • 13:45 US Chicago PMI. Estimate 56.6 points.
  • 14:30 US Crude Oil Inventories. Estimate 1.3M.
  • 18:00 US FOMC Statement.
  • 18:00 US Federal Funds Rate. Estimate <0.25%.

*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.