Gold Dips As Fed Trims QE

Gold prices continue to lose ground in Thursday trading, with the precious metal trading at $1280 late in the European session. On Wednesday, the Federal Reserve implemented another taper of QE and stated that it expects interest rates to remain at low levels. Over in the US, it’s a busy day, highlighted by two key releases – ISM Manufacturing PMI and Unemployment Claims. As well, Federal Reserve Chair Janet Yellen will address a banking conference in Washington.

As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

ADP Nonfarm Payrolls were released on Wednesday, ahead of the critical official NFPs later in the week. The news was positive, as the indicator jumped to 220 thousand, marking a four-month low. This easily beat the estimate of 203 thousand. However, Advance GDP couldn’t keep pace, as the key indicator’s upward swing came to a crashing halt, with a Q1 gain of just 0.1%, compared to a 3.2% reading in Q4. This was well off the estimate of 1.2%. Is the US economy stalling? The weak reading could be a result of a harsh winter, but this will be of little consolation to the markets, and the dollar has responded with losses against its major rivals.

 

XAU/USD for Thursday, May 1, 2014

Forex Rate Graph 21/1/13

XAU/USD May 1 at 12:15 GMT

XAU/USD 1280.20 H: 1291.99 L: 1277.82

 

XAU/USD Technical

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

 

  • XAU/USD has lost ground in Thursday trade.
  • 1273 continues to provide support to the pair, but this line has weakened following a dip by XAU/USD. This is followed by a support level at 1260.
  • 1300 is the next line of resistance. 1315 is next.
  • 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 Thursday trade, continuing the trend seen a day earlier. This is not consistent with the pair’s current movement, as gold has posted losses. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold reversing directions and moving upwards.

Gold has lost ground on Thursday. XAU/USD is steady in the European session.

 

XAU/USD Fundamentals

  • 11:30 US Challenger Job Cuts. Actual 5.7%.
  • 12:30 US Fed Chair Janet Yellen Speaks.
  • 12:30 US Unemployment Claims. Estimate 317K.
  • 12:30 US Core PCE Price Index. Estimate 0.1%.
  • 12:30 US Personal Spending. Estimate 0.7%.
  • 12:30 US Personal Income. Estimate 0.4%.
  • 13:45 US Final Manufacturing PMI. Estimate 55.8 points.
  • 14:00 US ISM Manufacturing PMI. Estimate 54.3 points.
  • 14:00 US Construction Spending. Estimate 0.5%.
  • 14:00 US ISM Manufacturing Prices. Estimate 59.4 points.
  • 14:30 US Natural Gas Storage. Estimate 75B.
  • All Day – US Total Vehicle Sales. Estimate 16.2M.

*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.