Gold Pushing Towards $1300

Gold has posted modest gains on Thursday, as the spot price stands at $1297.77 per ounce in the European session. In the US, it’s been a quiet week, but we’ll get a look at some key indicators later in the day – Unemployment Claims and Existing Home Sales.

Global demand for gold has dropped in the first quarter of 2014, weighing on the price of the precious metal. On Tuesday, the World Gold Council released a report which found that global demand for gold had dropped in Q1 to its lowest level in four years. Demand for the metal by China, the largest buyer of gold, slipped by 18% in Q1, and other major purchasers such as India also recorded a drop in demand. Gold tends to react to geopolitical events, and the ongoing crisis in Ukraine could continue to cause volatility in gold prices.

The Federal Reserve minutes were released on Wednesday, and there was no dramatic response from the markets. In the minutes, policymakers discussed an exit strategy from its QE stimulus program, which is set to terminate at the end of 2014. This will likely mean an increase in interest rates, but the minutes didn’t provide a timetable as to when rates might go up, and by how much. Low inflation levels means there is less pressure on the Fed to raise rates next year, but the economic conditions could change in the meantime. The Federal Reserve remains comfortable with its accommodative stance, and will want to see stronger growth and employment numbers before making changes to monetary policy, such as raising rates.

 

XAU/USD for Thursday, May 22, 2014

Forex Rate Graph 21/1/13

XAU/USD May 22 at 10:35 GMT

XAU/USD 1297.60 H: 1297.77 L: 1290.10

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1275 1280 1300 1315 1330

 

  • 1280 has strengthened in support as gold has changed directions and is rising towards the 1300 level.
  • On the upside, 1300 is under pressure. Will XAU/USD break through this barrier? The next line of resistance is at 1315.
  • Current range: 1280 to 1300.

Further levels in both directions:

  • Below: 1280, 1275, 1260 and 1252
  • Above: 1300, 1315, 1330, 1350 and 1388

 

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in Thursday trade, continuing the trend we saw a day earlier. This is not consistent with the pair’s movement, as gold has edged higher. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold gaining ground against the US dollar.

Gold has edged higher on Thursday and is putting pressure on the US dollar in the European session.

 

XAU/USD Fundamentals

  • 12:30 US Unemployment Claims. Estimate 312K.
  • 13:45 US Flash Manufacturing PMI. Estimate 55.6 points.
  • 14:00 US Existing Home Sales. Estimate 4.71M.
  • 14:00 US CB Leading Index. Estimate 0.4%.
  • 14:30 US Natural Gas Storage. Estimate 104B.

*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.