Gold Posts Slight Gains on Ukraine Plane Crash, Gaza Hostilites

Gold prices have moved slightly higher on Monday, as fighting rages in Gaza and tensions increase in Ukraine. In the European session, the spot price stands at $1316.03 per ounce. On the release front, there are no US releases on the schedule. Last week ended on a sour note as the UoM Consumer Sentiment remained steady in June, but fell short of the estimate.

International trouble spots are bullish for gold, and events in Ukraine and Gaza have led to nervous investors seeking the safe-haven precious metal. Last week’s downing of a Malaysian Airlines jet, apparently by pro-Russian separatists, has seriously frayed relations between the West and Russia, which have already been strained since the latter annexed Crimea. The Europeans are threatening stronger sanctions against Russia in response to the downing of the Malaysian jet. Meanwhile, the fighting in Gaza between Hamas and Israel has intensified. Casualties have been mounting on both sides, as the fighting enters its third week.

On Friday, US Consumer Sentiment remained steady at 81.3 points, but this was well below the estimate of 83.5 points. A day earlier, 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. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, improving employment data will put more pressure on the Fed to raise rates.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill last week. 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 rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Federal Reserve’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 trimming the program since last December, when it stood at $85 billion/month. 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 Monday, July 21, 2014

XAU/USD July 21 at 9:35 GMT

XAU/USD 1316.63 H: 1318.40 L: 1307.40

 

XAU/USD Technical

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

 

  • XAU/USD is showing little movement in the Asian and European sessions.
  • 1331 is the next resistance line. 1354 follows.
  • 1315 has switched to a support level. This line is under strong pressure. The round number of 1300 is next.
  • Current range: 1300 to 1315.

Further levels in both directions:

  • Below: 1315, 1300, 1275 and 1252.
  • Above: 1331, 1354 and 1375 and 1400.

 

OANDA’s Open Positions Ratio

XAU/USD ratio has posted gains in long positions on Monday. This is consistent with the movement of the pair, as gold has made slight gains. The ratio has a majority of long positions, indicative of trader bias towards gold moving higher.

 

XAU/USD Fundamentals

  • There are no US releases on Monday.

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.