Gold Remains Above $1300 on Iraqi Turmoil

Gold is stable on Monday, following sharp gains last week, when the metal gained about 2.8% against the dollar. The metal remains above the $1300 level as the fighting in Iraq continues. On the release front, today’s highlight is US Existing Home Sales, a key event.

The fighting in Iraq continues, as militants linked to al-Qaeda have overrun the north of the country. 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. Over the weekend, US President Barack Obama said the crisis could spread to other countries in the region. The turmoil in Iraq, a large oil producer, has pushed the price of gold above the  $1300 level, as the metal is considered a hedge during periods of geopolitical instability.

There was positive economic news out of the US on Thursday, as Unemployment Claims dipped to 312 thousand last week, beating the estimate of 316 thousand. As well, the Philly Fed Manufacturing Index, which has been on the upswing for most of 2014, continued the trend and improved to 17.8 points, crushing the estimate of 14.3. This was the index’s strongest reading since last August, and points to a manufacturing sector which is expanding in order to keep up with increasing demand.

The Federal Reserve continued to trim its QE program on Wednesday, reducing the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won’t see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as “steady as she goes”.

 

XAU/USD for Monday, June 23, 2014

XAU/USD June 23 at 11:00 GMT

XAU/USD 1310.58 H: 1317.32 L: 1310.16

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1275 1300 1315 1331 1354

 

  • Gold prices are showing little movement on Monday.
  • The round number of 1300 continues in a support role. This is followed by a support level at 1275.
  • 1315 is an immediate resistance line. This is followed by resistance at 1331, which has remained intact since late March.
  • Current range: 1300 to 1315.

Further levels in both directions:

  • Below: 1300, 1275, 1260 and 1250
  • Above: 1315, 1331, 1354 and 1375

 

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in Monday trade. This is reflected in the lack of movement we are seeing in gold. The ratio is made up of a majority of long positions, reflecting trader bias towards gold prices moving higher.

Gold is steady on Monday. XAU/USD has edged lower in the European session.

 

XAU/USD Fundamentals

  • 13:45 US Flash Manufacturing PMI. Estimate 56.1 points.
  • 14:00 US Existing Home Sales. Estimate 4.74M.

*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.