Gold Prices Ease Ahead of CPI Numbers

Gold continues to lose ground on Tuesday, with the spot price at $1263.38 per ounce in Tuesday’s European session. The precious metal climbed above $1284 in Monday’s European session, but was unable to consolidate at these levels. In the US, there are two key releases on the calendar – Building Permits and Core CPI.

In Iraq, militants linked to al-Qaeda continue to push back government troops, and captured key cities on the weekend. The insurgents are only about 60 kilometers from the capital of Baghdad, and the situation has quickly escalated into a major crisis for both the Iraqi and US governments. Gold prices jumped to three-week highs on Monday, as concerned investors snapped up gold, which is considered a hedge during periods of geopolitical instability. We could see gold prices bounce higher if the situation deteriorates.

After a poor performance last week, US releases started the week on a positive note, as Empire State Manufacturing Index climbed to 19.3 points, its best showing since February 2012. This easily surpassed the estimate of 15.2 points. The markets are keeping a close eye on Core CPI, the primary gauge of consumer inflation. The markets are expecting another weak reading, with an estimate of 0.2%.

The US ended a rough week on a sour note, as inflation and consumer confidence numbers missed their estimates. PPI, a key gauge of inflation in the manufacturing sector, came in at -0.2%, its worst reading since October. The estimate stood at 0.1%. Preliminary UoM Consumer Sentiment also lost ground, falling to 81.3 points, short of estimate of 83.3. However, with only one reading this year below the 80-point level, US consumer confidence remains at high levels.

XAU/USD for Tuesday, June 17, 2014

XAU/USD June 17 at 12:10 GMT

XAU/USD 1265.29 H: 1273.29 L: 1263.38

XAU/USD Technical

• Gold has edged lower on Tuesday.
• 1260 is providing support. This is followed by a support level at 1250.
• 1275 has reverted to a resistance role as gold has lost ground. This is followed by the round number of 1300.
• Current range: 1260 to 1275.

Further levels in both directions:

• Below: 1260, 1250, 1230 and 1209
• Above: 1275, 1300, 1315 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Tuesday. This is consistent with what we are seeing from the pair, as gold has posted modest losses. The ratio is made up of a substantial majority of long positions, reflecting a strong trader bias towards gold reversing directions and moving higher.

Gold has posted modest losses on Tuesday. XAU/USD is almost unchanged in the European session.

XAU/USD Fundamentals

• 12:30 US Building Permits. Estimate 1.07M.
• 12:30 US Core CPI. Estimate 0.2%.
• 13:00 US CPI. Estimate 0.2%.
• 13:15 US Housing Starts. Estimate 1.04M.

*Key releases are highlighted in bold

*All release times are GMT

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