Gold Retreats From $1320 Line

Gold started Friday trading just below resistance at $1320,and has dipped lower, losing much of the gains we saw a day earlier. In the European session, the spot price stands at $1309.60 per ounce. On the release front, today’s highlight is UoM Consumer Sentiment. The markets are expecting a strong gain in June, which could bolster the US dollar.

Gold prices pushed higher on Thursday, following news of a Malaysian Airlines plane crash over Ukraine. The aircraft was apparently shot down by a missile, and Ukrainian forces and pro-Russian separatists have traded accusations about which side is responsible. The incident could ignite tensions between Ukraine and Russia, and comes just days after European countries slapped new sanctions against Russia. Gold often reacts to geopolitical events, and if the crisis in Ukraine intensifies, traders should expect gold prices to move higher.

US Unemployment Claims dropped slightly to 302 thousand, beating the estimate of 310 thousand. This figure marks a seven-week low, as the economy continues to churn out impressive employment data. At the same time, the housing sector is struggling, and Building Permits fell to 0.96 million, its lowest level since January. The markets had expected a much stronger reading, with an estimate of 1.04M. Housing Starts followed suit, coming in at 0.89 million, compared to an estimate of 1.02 million. Finally, the Philly Fed Manufacturing Index sparkled, jumping to 23.9 points, well above the estimate of 15.6 and its best showing since February 2011.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but that rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Fed’s asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.

 

XAU/USD for Friday, July 18, 2014

XAU/USD July 18 at 9:30 GMT

XAU/USD 1309.60 H: 1320.16 L: 1308.63

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1250 1275 1300 1315 1331 1354

 

  • XAU/USD edged lower in the Asian session and has continued this trend in European trading.
  • 1315 is a weak resistance line. 1331 follows.
  • The round number of 1300 has switched to support as XAU/USD trades at lower levels. 1275 is stronger.
  • Current range: 1300 to 1315.

Further levels in both directions:

  • Below: 1300, 1275, 1250 and 1230.
  • Above: 1315, 1331 and 1354 and 1375.

 

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Friday, continuing the trend seen a day earlier. This is not consistent with the movement of the pair, as gold has posted losses. The ratio has a majority of long positions, indicative of trader bias towards gold reversing direction and moving higher.

 

XAU/USD Fundamentals

  • 13:55 US Preliminary UoM Consumer Sentiment. Estimate 83.5 points.
  • 13:55 US Preliminary UoM Inflation Expectations.
  • 14:00 US CB Leading Index.  Estimate 0.6%.

*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.