Gold Under Pressure on Interest Rate Expectations

Gold prices are flat on Wednesday, continuing the trend seen a day earlier. In the European session, the spot price stands at $1254 per ounce. With no major releases out of the US today, we can expect the lack of activity to continue for the remainder of the day.

US numbers continue to point to a deepening recovery, and the Federal Reserve is expected to trim QE next week and wind up the scheme in October. The markets are expecting an interest rate hike by mid-2015, and will be looking for hints from Fed policymakers as to the timing of a rate hike. At the same time, the US labor market is showing some troubling signs. JOLTS Job Openings was unchanged in August at 4.67 million, short of the estimate of 4.72 million. On Friday, the eagerly-anticipated Nonfarm Employment Change crashed to 142 thousand, its lowest gain since January. This surprised the markets, which had expected a gain of 226 thousand. The disappointing release follows a weak ADP Nonfarm Payrolls report as well as a rise in unemployment claims.

After months of fighting in eastern Ukraine between government forces and pro-Russian fighters, a ceasefire which began on Friday appears to be holding up, although some sporadic fighting has been reported. Russia has denied assisting the rebels, but both Ukraine and NATO have said that Russian forces are actively involved in the fighting. The crisis has severely strained relations between the West and Russia, and trade between Europe and Russia could be significantly affected. European countries have already implemented sanctions against Russia, and have threatened further sanctions if the ceasefire does not last.

XAU/USD for Wednesday, September 10, 2014

XAU/USD September 10 at 9:10 GMT

XAU/USD 1254.07 H: 1257.82 L: 1252.08

XAU/USD Technical

• XAU/USD has been stable in the Asian and European sessions.
• On the downside, 1252 is under strong pressure and could break during the day. This is followed by support at 1240.
• 1275 has some breathing room as a resistance line.
• Current range: 1252 to 1275.

Further levels in both directions:

• Below: 1252, 1240, 1210 and 1186
• Above: 1275, 1300, 1315 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Wednesday. This is consistent with the movement we’re seeing from the pair, as gold has posted small losses. The ratio continues to have a substantial majority of long positions, indicative of trader bias towards gold moving to higher levels against the dollar.

XAU/USD Fundamentals

• 14:00 US Wholesale Inventories. Estimate 0.5%.
• 14:30 US Crude Oil Inventories. Estimate -1.0M.
• 17:01 US 10-year Bond Auction.

*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.