Gold Moves Higher on Iraq, Ukraine Concerns

Gold has posted gains on Tuesday, with the spot price at $1325.33 per ounce late in the European session. The precious metal has moved higher thanks to tensions in Iraq and Ukraine. On the release front, it’s a busy day in the US, highlighted by CB Consumer Confidence and New Home Sales, the second key housing event this week.

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. Meanwhile, the situation is tense in Ukraine, as the government has vowed to press ahead and sign an economic association agreement with the EU on Friday. The crises in Iraq and Ukraine, have pushed the price of gold above the $1300 level, as the metal is considered a hedge during periods of geopolitical instability.

There were no surprises last week from the Federal Reserve, which continued to taper its QE program.  The Fed reduced 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 Tuesday, June 24, 2014

XAU/USD June 24 at 11:30 GMT

XAU/USD 1325.33 H: 1325.98 L: 1314.04

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1275 1300 1315 1331 1354 1375

 

  • Gold was steady in the Asian session and edged higher in European trading.
  • 1315 has reverted to a support role. This is followed by the round number of 1300.
  • 1331 is an immediate resistance line. This is followed by resistance at 1354, which has held firm since March.
  • Current range: 1315 to 1331.

Further levels in both directions:

  • Below: 1315, 1300, 1275 and 1260
  • Above: 1331, 1354, 1375 and 1389

 

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in Tuesday trade. This is not reflected in the pair’s movement, as XAU/USD has moved higher. The ratio is made up of a majority of long positions, reflecting trader bias towards gold prices continuing to gain ground against the dollar.

 

XAU/USD Fundamentals

  • 13:00 US S&P/CS Composite-20 HPI. Estimate 11.7%.
  • 13:00 US HPI. Estimate 0.6%.
  • 14:00 US CB Consumer Confidence. Estimate 83.6 points.
  • 14:00 US New Home Sales. Estimate 442K.
  • 14:00 US Richmond Manufacturing Index. Estimate 6 points.
  • 14:00 US Treasury Secretary Jack Lew Speaks.

*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.