Gold Gains As Ukraine Referendums Fuel Tensions

After a quiet few days, gold has bounced back and climbed close to the $1300 level in Monday trade. In the European session, the spot price stands at $1296.44. The metal has gained ground as voters in referendums held in eastern Ukraine on Sunday voted for self-rule. On Friday, US JOLTS Jobs Openings disappointed with a soft reading in April. It’s a quiet day on the release front, with just one economic release – the US Federal Budget.

The crisis in Ukraine continues to take twists and turns, leading to volatility in gold prices. Last week, Russian President Vladimir Putin surprised observers when he urged pro-Russian separatists to postpone their referendum on independence. However, the separatists shrugged off Putin’s request and went ahead with referendums in two cities in eastern Ukraine on Sunday. Not surprisingly, voters in this pro-Russian region voted in favor of self-rule. The Ukraine government and Western countries denounced the referendums as illegal and have threatened further sanctions against Russia. Elections scheduled in Ukraine for the end of May remain in jeopardy and there are mounting fears that the country could slide into civil war.

US Unemployment Claims rebounded last week, as the key indicator dipped to 319 thousand. This beat the estimate of 328 thousand. The reading follows last week’s excellent Nonfarm Payrolls and Unemployment Claims. JOLTS Jobs Openings failed to keep pace, slipping to 4.01 million, well off the estimate of 4.21 million. With the employment picture brightening, market sentiment remains strong toward the US economy, and this could strengthen the US dollar.

Federal Reserve Chair Janet Yellen testified before Congress last week and gave a cautious thumbs-up to the economic recovery. She said that the economy has improved, but pointed to two sore spots – the job market remains weak and inflation is below the Fed’s target of 2%. Yellen stated that she therefore expects that low interest rate levels will continue for a “considerable time”. Yellen has stated previously that slack remains in the economy, and the Fed is expected to proceed carefully with future trims to its QE scheme. Since December, the Fed has trimmed the asset-purchase program by almost half, cutting it to $45 billion each month.

 

XAU/USD for Monday, May 12, 2014

Forex Rate Graph 21/1/13

XAU/USD May 12 at 10:50 GMT

XAU/USD 1296.44 H: 1297.09 L: 1282.15

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1252 1260 1273 1300 1315 1330

 

  • XAU/USD has posted gains in Monday trade.
  • 1273 is providing support. This is followed by support at 1260.
  • 1300 is under strong pressure. Will the pair break through this level? Next, there is 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 on Monday, continuing the trend seen at the end of last week. This is consistent with the pair, as gold prices have moved higher. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold continuing to gain ground against the US dollar.

Gold is on the move, and is closing in on the 1300 level. The dollar is under pressure in the European session.

 

XAU/USD Fundamentals

  • 16:00 US FOMC Member Charles Plosser Speaks.
  • 18:00 US Federal Budget Balance. Estimate 112.6B.

*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.