Gold Loses Ground After FOMC Statement

Gold prices have fallen close to $1200 on Thursday as the metal continues to lose ground to the broadly-stronger US dollar. In the European session, the spot price per ounce stands at $1205.43, marking a three-week low. In the US, today’s highlights are US GDP and Unemployment Claims. Both indicators are expected to post strong figures, so we could see the dollar post gains in the North American session. As well, Federal Reserve Chair Janet Yellen will address an event in Washington.

The US dollar posted strong gains against gold on Wednesday, boosted by a hawkish Fed policy statement. The Fed said that the labor market is strengthening and inflation remains on target, although it did note that the labor market participation rate remains low. As expected the Fed completed the taper of its QE3 program. The asset-purchase program was initially started in 2008, at the height of the economic crisis, in order to boost a weak US economy. The termination of the QE is a symbolic step which is a vote of confidence from the powerful Fed that the US economy is on the right track

US durable goods looked dismal in September. Core Durable Goods Orders dropped 0.2%, its second decline in three months. This was well short of the estimate of 0.5%. Durable Goods Orders followed suit with a decline of -1.3%. This was a second straight decline, and missed the estimate of 0.4%. There was much better news from CB Consumer Confidence, as the indicator climbed to 94.5 points, up sharply from 86.0 points. This easily beat the estimate of 87.4 and marked a 7-year high. An increase in consumer confidence usually translates into stronger consumer spending, which is a critical component for economic growth.

XAU/USD for Thursday, October 30, 2014

XAU/USD October 30 at 10:05 GMT

XAU/USD 1205.43 H: 1215.65 L: 1201.47

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1130 1156 1200 1215 1240 1252

 

  • Gold lost ground late in the Asian session. The pair is stable in European trade.
  • 1215 has switched to a resistance role as gold trades at higher levels. 1240 is stronger.
  • On the downside, 1200 is under strong pressure. Will the pair break below this level?
  • Current range: 1200 to 1215.

Further levels in both directions:

  • Below: 1200, 1156, 1130 and 1111
  • Above: 1215, 1240, 1252, 1275 and 1300

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in long positions on Thursday. This is not consistent with the pair, as gold continues to post losses. The ratio has a majority of long positions, indicative of trader bias in favor of reversing ground and moving higher.

 

XAU/USD Fundamentals

  • 12:30 US Advance GDP. Estimate 3.1%.
  • 12:30 US Unemployment Claims. Estimate 284K.
  • 14:30 US Advance GDP Price Index. Estimate 2.0%.
  • 13:00 Federal Reserve Chair Janet Yellen Speaks.
  • 14:30 US Natural Gas Storage. Estimate 83B.

*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.