Gold Edges Higher to Start Off Week

Gold has posted modest gains on Monday, as the spot price is $1241.61 per ounce in the European session. Gold has recovered nicely in the past two weeks, when it was trading below $1190. In economic news, it’s a quiet start to the week, with no US data releases on Monday.

The US dollar posted strong gains against gold in September and early October, pushing the metal below the $1200 level. However, gold prices have since rebounded back to the $1240 level. Why the renewed appetite for gold on the part of investors? A key reason is that the Federal Reserve has put out signals that it may delay changing its monetary stance and raising interest rates. The Fed has noted that there is still slack in the economy and global economic conditions remain weak. A rate hike is still expected in 2015, but the Fed is unlikely to pull the trigger early in the year. With continuing uncertainty about the timing of a rate hike, gold remains an attractive alternative to the greenback.

US releases wrapped up the week on a high note, as UoM Consumer Sentiment climbed to 86.4 points, its highest reading since July 2007. The markets had expected a reading of 84.3 points. This indicates that the US consumer remains optimistic about the economy and is not overly concerned about warnings of a global slowdown. On the housing front, Building Permits and Housing Starts met expectations. Strong US employment numbers continue to drive the US recovery, as US job claims dropped to 264 thousand, marking a 14-year low. The estimate stood at 286 thousand.

XAU/USD for Monday, October 20, 2014

XAU/USD October 20 at 10:50 GMT

XAU/USD 1241.61 H: 1243.36 L: 1234.61

XAU/USD Technical

• Gold was flat for most of the Asian session. The pair moved higher late in the session and this trend has continued in European trade.
• On the upside, 1252 is an immediate resistance line. 1275 is stronger.
• 1240 is an immediate support level. 1215 is next.
• Current range: 1240 to 1252.

Further levels in both directions:

• Below: 1240, 1215, 1186, 1156 and 1136
• Above: 1252, 1275, 1300 and 1322

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Monday. This is not consistent with the pair’s movement, as gold continues to post gains. The ratio has a majority of long positions, indicative of trader sentiment in favor of gold continuing to move higher.

XAU/USD Fundamentals

• 14:00 US FOMC Member Jerome Powell 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.