Gold Shrugs Off Solid US Employment Numbers

Gold continues to show little movement on Monday, as the spot price stands at $1255.54 per ounce in the European session. The precious metal had an uneventful week, and the lack of activity is likely to continue on Monday, with no US releases on the schedule.

In the US, employment numbers were solid late last week. Unemployment Claims and Nonfarm Payrolls, both key indicators, met market expectations. Unemployment Claims came in at 312 thousand, slightly above the estimate of 309 thousand. Nonfarm Employment Change met modest expectations on Friday, adding 217 thousand new jobs. The estimate stood at 214 thousand. The Unemployment Rate stayed pegged at 6.3%, beating the estimate of 6.4%.

Mario Draghi and his colleagues finally pressed the trigger on Thursday, as the ECB lowered the benchmark interest rate for the first time since November 2013. The rate was lowered to 0.15%, less than expected by the markets, which had anticipated a cut to 0.10%. As well, the marginal lending rate was cut to 0.40% from 0.75% and the deposit facility rate to -0.10% from 0.0%. This is the first time that the ECB has cut deposit rates below 0%, the aim being to encourage banks to lend more funds to businesses rather than have to pay to park funds overnight with the central bank. Draghi opted not to implement a quantitative easing program, but did hint that further action was on the way if necessary.

The ECB’s rate cuts are a belated response to weak growth and low inflation in the Eurozone, but the markets had expected more. The cut in the benchmark rate was not as deep as anticipated, and many market players were looking for an asset purchase program, such as the schemes adopted by the Federal Reserve and Bank of England. The euro did drop as low as the 1.35 line following the ECB move, but recovered and is back at levels prior to the ECB announcement. It’s safe to say that the markets were underwhelmed by the ECB’s actions, with one analyst saying the ECB had fired a lot of small bullets rather than resorting to a bazooka.

 

XAU/USD for Monday, June 9, 2014

XAU/USD June 9 at 10:45 GMT

XAU/USD 1255.54 H: 1256.15 L: 1251.59

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1200 1230 1250 1260 1275 1300

 

  • Gold is steady on Monday.
  • 1250 continues to provide support. Next there is support at 1230.
  • 1260 is the next resistance line. This is followed by resistance at 1275.
  • Current range: 1250 to 1260.

Further levels in both directions:

  • Below: 1250, 1230, 1200 and 1182
  • Above: 1260, 1275, 1300, 1315

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Monday, continuing the trend we saw late in the week. This is not consistent with what we are seeing from the pair, which is almost unchanged. The ratio is made up of a substantial majority of long positions, reflecting a strong trader bias towards gold breaking out and gaining ground against the US dollar.

Gold continues to show little movement. XAU/USD is unchanged in the European session.

 

XAU/USD Fundamentals

  • There are no US releases on Monday.

 

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.