Gold Dips, Close to 9-Month Lows After Fed Policy Statement

Gold prices continue to fall, as the spot price stands at $1219.60 per ounce on Thursday. XAU/USD is at its lowest levels since late December of 2013. On the release front, there are three key events on the calendar – Building Permits, Unemployment Claims and the Philly Fed Manufacturing Index. As well, Federal Reserve Chair Janet Yellen will deliver remarks at an event in Washington.

The US dollar gained ground against gold on Wednesday following the Federal Reserve statement. The Fed statement reaffirmed that interest rates would remain ultra-low for a “considerable time” after the asset purchase scheme (QE) ends next month, but surprised the markets in hinting that once a rate hike was introduced, rate levels could move up more quickly than expected. As expected, the Fed trimmed QE by $10 billion/month, and the remaining $15 billion/month is scheduled to be phased out in October.

US inflation data was worse than expected on Wednesday. CPI, the primary gauge of consumer inflation, came in at -0.2%, its first drop since October. The estimate stood at +0.1%. Core CPI followed suit with a flat reading of 0.0%. This was the first time the index failed to post a gain since October 2010. The weak numbers follow disappointing manufacturing inflation data. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Low inflation continues to be a concern and could delay an interest rate hike in 2015.

Will the United Kingdom remain united on Friday? It’s anyone’s guess as Scottish voters cast their ballots in a historic referendum on independence on Thursday. The most recent polls are pointing to a close vote, with many voters still undecided. If voters do choose to secede from the UK, this would create plenty of questions and uncertainty, including what currency an independent Scotland would use and how the national debt would be divided. A vote to split up the UK could lead to turmoil in the markets and weigh heavily on the markets. Traders should treat the referendum as a market-mover, as a close vote could have negative repercussions for gold.

XAU/USD for Thursday, September 18, 2014

XAU/USD September 18 at 12:00 GMT

XAU/USD 1219.60 H: 1225.54 L: 1218.03

XAU/USD Technical

• XAU/USD has lost ground and the pair is putting pressure on 1210, the next support line.
• 1210 is an immediate support line. Will this line fall during the day? 1186 is a stronger line.
• On the upside, 1240 has some breathing room as gold trades at lower levels.
• Current range: 1210 to 1240.

Further levels in both directions:

• Below: 1210, 1186, 1156 and 1111
• Above: 1240, 1252, 1275, 1300, and 1315

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Thursday, reversing the direction seen a day earlier. This is consistent with the movement we’re seeing from the pair, as gold has posted small losses. The ratio has a substantial majority of long positions, indicative of trader bias towards gold reversing its downward trend.

XAU/USD Fundamentals

• 12:30 US Building Permits. Estimate 1.04M.
• 12:30 US Unemployment Claims. Estimate 312K.
• 12:30 US Housing Starts. Estimate 1.04M.
  
• 12:45 US Federal Reserve Chair Janet Yellen Speaks.
• 14:00 US Philly Fed Manufacturing Index. Estimate 22.8 points.
• 14:30 US Natural Gas Storage. Estimate 91B.

*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.