Gold Close to 2-Month Lows as Markets Eye Jackson Hole

Gold remains under pressure on Friday, as the metal hovers close to two-month lows. The spot price stands at $1277.68 per ounce in the European session. There are no economic releases out of the US today. The markets will be closely monitoring the symposium in Jackson Hole, Wyoming, with Federal Reserve Chair Janet Jackson and ECB President Mario Draghi scheduled to speak on Friday.

Financial leaders and central bankers from around the world have gathered in picturesque Jackson Hole, Wyoming. This is Janet Yellen’s first appearance as Fed chair at the conference, and she will deliver a keynote speech on Friday. Mario Draghi is scheduled to speak about labor market dynamics, but the markets will be hoping to hear some ideas about how the ECB plans to tackle the lack of inflation and growth in the Eurozone. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference’s usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. Traders should therefore be prepared for some movement in the currency markets, which could affect the price of gold.

US releases wrapped up the week on a high note. Unemployment Claims improved to 298 thousand, lower than the estimate of 302 thousand. The key indicator has now beaten the estimate in six of the past seven readings. Thursday’s other key event, the Philly Fed Manufacturing Index, shot higher in July, rising to 28.0 points. The markets had expected the indicator to slip to 19.7 points. There was more good news on the housing front, as Existing Home Sales improved to 5.15 million, well above the estimate of 5.01 million. This marked the highest level we’ve since September 2013. What is particularly encouraging is that the data stems from a wide range of sectors, which points to balanced economic growth.

In a highly anticipated event, the Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game as to a rate hike will only intensify. Will Janet Yellen provide some clues when she speaks in Jackson Hole?

 

XAU/USD for Friday, August 22, 2014

XAU/USD August 22 at 9:10 GMT

XAU/USD 1276.48 H: 1281.83 L: 1276.48

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1240 1252 1275 1300 1315 1331

 

  • XAU/USD edged higher in the Asian session. The pair is stable in European trading.
  • 1300 has strengthened in resistance as the pair trades at lower levels.
  • On the downside, 1275 is under strong pressure and could break during the day. 1252 is stronger.
  • Current range: 1275 to 1300.

Further levels in both directions:

  • Below: 1275, 1252, 1240 and 1210
  • Above: 1300, 1315, 1331 and 1345

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in long positions on Friday. This is consistent with the movement of the pair, as gold has posted small gains. The ratio continues to have a substantial majority of long positions, indicative of trader bias towards gold moving higher.

 

XAU/USD Fundamentals

  • Day 2 – Jackson Hole Symposium.
  • 14:00 US Federal Reserve Chair Janet Yellen Speaks at Jackson Hole.
  • 18:30 ECB President Mario Draghi Speaks at Jackson Hole.

*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.