Gold in Holding Pattern Ahead of ECB Decision, Unemployment Claims

The recent gold free-fall has taken a breather, as the metal stabilized in Thursday trading. In the European session, the spot price stands at $1144.66. Gold prices have tumbled almost 7% in less than a week, as XAU/USD trades at 4.5-year lows. All eyes are on the ECB, which will release a rate statement, followed by a Mario Draghi press conference. In the US, today’s highlight is Unemployment Claims, with the markets anticipating another strong reading. The estimate stands at 287 thousand, little changed from the previous release.

There hasn’t been much for Mario Draghi and his ECB colleagues to cheer about lately, so it will be interesting to see what the ECB plans to serve later today. The record-low interest rate of 0.05% is unlikely to change, but Draghi’s press conferences are unpredictable. If the ECB head surprises the markets with hints about further stimulus, the euro could lose ground. With the Eurozone mired in low growth, weak inflation and high unemployment, the ECB is under pressure to take more action, as interest rate cuts have not improved the economic situation. There has been talk that the ECB could borrow a page from other central banks and implement an asset-purchase program (QE) to kick-start the struggling economy. The US Federal Reserve terminated an extensive QE program earlier in October, marking a strong vote of confidence in the health of the US economy.

The EU released its Economic Forecasts on Tuesday, which provides an economic projection for Eurozone members for the next two years. EU Vice President Jyrki Katainen said that the economic and employment situation is “not improving fast enough” in the zone, which continues to struggle with very weak growth and high unemployment. The EU noted that growth is expected to reach just 0.8%, growth this year, and heavyweights Germany and France are expected to post weak growth for 2014.

Over in the US, job numbers have been solid in recent readings, and the trend continued on Wednesday with an excellent performance from ADP Nonfarm Payrolls. The key indicator climbed to 230 thousand, easily beating the estimate of 214 thousand. This marked the indicator’s strongest showing in 2014. We’ll get a look at Unemployment Claims later in the day, and the official Nonfarm Payrolls on Friday.

XAU/USD for Thursday, November 6, 2014

XAU/USD November 6 at 10:10 GMT

XAU/USD 1144.66 H: 1147.01 L: 1138.07

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1073 1111 1130 1156 1175 1200

 

  • Gold has been flat in the Asian and European sessions.
  • 1156 is an immediate resistance line. 1175 is stronger.
  • 1130 is a weak support line. 1111 is next.
  • Current range: 1130 to 1156.

Further levels in both directions:

  • Below: 1130, 1111, 1073 and 1041
  • Above: 1156, 1175, 1200, 1215 and 1240

 

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Thursday. This is consistent with the lack of movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias in favor of gold breaking out and moving higher.

 

XAU/USD Fundamentals

  • 12:45 ECB Minimum Bid Rate. Estimate 0.05%.
  • 13:30 ECB Press Conference.
  • 13:30 US Unemployment Claims. Estimate 285K.
  • 13:30 US Preliminary Nonfarm Productivity. Estimate 0.9%.
  • 13:30 US Preliminary Unit Labor Costs. Estimate 1.0%.
  • 15:30 US Natural Gas Storage. Estimate 86B.
  • 18:30 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.

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.