Gold Improves to 3-Week Highs

Gold has posted gains on Tuesday, continuing the upward movement which started the week. The metal is trading at a spot price of $1213.20 per ounce in the European session.  In the US, today’s highlight is the ISM Non-Manufacturing PMI, with the markets expecting a weaker reading for December. The estimate stands at 58.2 points.

Deflation worries in the Eurozone continue, as German Preliminary CPI remained stuck at the 0.0% level in December for a second straight month. This missed the very modest estimate of 0.1%. The reading comes at a crucial time, with the ECB holding a policy meeting on January 22. With the threat of deflation hanging over the Eurozone like a dark cloud, the ECB will have to seriously consider quantitative easing, which would mean buying large amounts of Eurozone bonds. QE worked well in the US, but the Federal Reserve was calling the shots and was able to implement and then taper QE as it pleased. It’s a far different story in Europe, as the powerful German Bundesbank has voiced its opposition to such a move and ECB head Mario Draghi will find it difficult to take such a dramatic step without a strong consensus.

On Friday, US ISM Manufacturing PMI disappointed, falling to 55.5 points. This missed the forecast of 57.6 points and marked a 6-month low for the index. Still, market sentiment remains positive regarding the US economy, and the US dollar continues to look sharp against its major rivals. We’ll get a look at the ISM Non-manufacturing PMI on Tuesday. The markets are expecting a softer reading in the December release.

XAU/USD for Tuesday, January 6, 2015

XAU/USD January 6 at 9:40 GMT

XAU/USD 1213.20 H: 1214.31 L: 1201.67

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1156 1175 1200 1215 1240 1255

 

  • XAU/USD has posted slight gains in the Asian and European sessions. The pair is putting strong pressure on resistance at 1215.
  • 1200 has reverted to a support role as gold trades at higher levels. 1175 is next.
  • On the upside, 1215 is under pressure. Will the pair break through this level during the day? 1240 is stronger.
  • Current range: 1200 to 1215

Further levels in both directions:

  • Below: 1200, 1175, 1156, 1130 and 1111
  • Above: 1215, 1240, 1255 and 1275

 

OANDA’s Open Positions Ratio

XAU/USD ratio is showing gains in short positions on Tuesday. This is a result of the recent strong gains by gold, which has resulted in more long positions being covered and thus an increase in the percentage of open short positions. The ratio is close to a split between open and short positions, indicating a lack of trader bias as to what direction the pair will take next.

XAU/USD Fundamentals

  • 14:45 US Final Services PMI. Estimate 53.8 points.
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 58.2 points.
  • 15:00 US Factory Orders. Estimate -0.3%

*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.