Gold Under Pressure, Tests Support at $1210

Gold has edged lower to start off the week, with a spot price of $1212.88 per ounce in Monday’s European session. The metal is having trouble finding its footing against the US dollar, and has posted weekly losses for a third straight time. The pair is putting pressure on the support line of $1210. It’s a quiet schedule on Monday, highlighted by Existing Home Sales.

Scottish citizens went to the polls on Thursday in a historic referendum on whether to secede from the United Kingdom. The markets had expected a very close vote, based on polls leading up to the vote. However, at the end of the day, the No side won the vote in convincing fashion, with 55% of the vote, versus 44% for the Yes side. There had been predictions of a financial downturn in the UK if Scotland had voted for independence or if the vote was extremely close. As well, a vote for to secede would have raised thorny financial questions such as what currency would be used by an independent Scotland. So, Friday morning brought a tremendous sense of relief in British political and financial circles after the final votes were counted, as the United Kingdom will remain united.

The US economy may be much more robust than that of the Eurozone, but it is also affected by weak inflation levels. 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.

US inflation data was worse than expected in August. 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.

 

XAU/USD for Monday, September 22, 2014

XAU/USD September 22 at 10:40 GMT

XAU/USD 1212.88 H: 1217.90 L: 1208.19

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1156 1186 1210 1240 1252 1275

 

  • XAU/USD has been stable in the Asian and European session.
  • 1210 remains under pressure. 1186 is stronger.
  • On the upside, 1240 has strengthened 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 Monday. This is consistent with the slight losses shown by the pair. The ratio has a substantial majority of long positions, indicative of trader bias towards gold reversing its recent downward trend and moving higher.

 

XAU/USD Fundamentals

  • 14:00 US Existing Home Sales. Estimate 5.21M.
  • 14:05 US FOMC Member William Dudley Speaks.
  • 23:30 US FOMC Member Narayana Kocherlakota Speaks.

*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.