Gold Kicks Off Week With Losses

Gold prices are lower on Monday, as the spot price stands at $1321.35 per ounce late in the European session. It’s a very quiet start to the week, with no US releases. In the Eurozone, ECB Mario Draghi head will testify at the Committee on Economic and Monetary Affairs of the European Parliament. Any clues from Draghi regarding monetary steps being considered by the ECB could impact on the movement of XAU/USD.

In the US, employment data continues to impress. Last week, Unemployment Claims dropped to 304 thousand, well below the estimate of 316 thousand. Employment numbers for June looked sharp, led by a jump in Nonfarm Payrolls and a drop in the unemployment rate. The strong employment numbers have increased speculation about an interest rate hike by the Federal Reserve, and remarks by Fed policymakers will be closely scrutinized as the markets look for clues as to the timing of any rate moves.

The Federal Reserve minutes did not shed much light on when the Fed plans to raise interest rates, but policymakers did agree to wind up the QE scheme by October. The asset purchase program flooded the economy with over $2 trillion, and the Fed has been steadily reducing the program since last December. Winding down QE, which currently stands at $45 billion/month, will require several more tapers by the Fed, but that shouldn’t pose a problem, given the solid employment data the economy has been churning out.

The ECB cut interest rates in June, hoping to inject some life into growth and inflation levels. So far, the results have been less than impressive, as inflation and manufacturing numbers in Germany and France, the two largest economies in the Eurozone, remain at very low levels. A strong euro has not helped matters, as it makes European exports more expensive and weighs on growth. If the trend of weak figures continues, the ECB will face more pressure to take action at its next policy meeting.

 

XAU/USD for Monday, July 14, 2014

XAU/USD July 14 at 10:05 GMT

XAU/USD 1321.35 H: 1338.92 L: 1316.93

 

XAU/USD Technical

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

 

  • XAU/USD lost ground in the Asian session and this continued until early in the European session, before the pair steadied close to the 1320 level.
  • 1331 has reverted to a resistance role as gold has lost ground. 1354 follows.
  • 1315 is a weak support line. The round number of 1300 is next.
  • Current range: 1315 to 1331.

Further levels in both directions:

  • Below: 1315, 1300 and 1275 and 1252
  • Above: 1331, 1354, 1375 and 1388

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in Monday trade, continuing the trend we saw late last week. This is not reflected in the pair’s movement, as the pair has posted losses to start off the week. The ratio currently has a majority of long positions, indicative of trader bias towards gold moving higher.

 

XAU/USD Fundamentals

  • 17:00 ECB President Mario Draghi 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.