XAU/USD – Gold Woes Continues, FOMC Minutes Ahead

Gold is showing limited movement on Wednesday, as the metal trades at a spot price of $1070.20 in the European session. Gold prices continue to soften, and lost over 1.0% of its value on Tuesday. Gold is currently trading at its lowest level since February 2010. Will the sharp slide continue? Taking a look at economic news, today’s key release is Building Permits, with the markets expecting an improvement to 1.15 million. Later on Wednesday, the Federal Reserve will release the minutes of its October policy meeting, and the markets will be keenly interested in the comments of policymakers regarding a rate hike.

The guessing game continues as to whether the Federal Reserve will kick off a series of rate hikes in December, so the markets will be carefully combing through the Fed minutes, which will be released later n Wednesday. Market expectations have risen to 66% that the Fed will make a move next month. The last time the Fed raised interest rates was in June 2006, so such a move is sure to have a significant effect on the global currency markets. With the US economy close to full employment and many economic indicators pointing upwards, one of the last pieces in the puzzle is inflation. Last week’s PPI was awful, posting a second straight decline. On Tuesday, CPI and Core CPI posted small gains of 0.2%, matching the forecast. Are these lukewarm readings enough to convince the Fed to make a move in December? The Fed has said that inflation levels are an important factor in determining its decision in December, but with US inflation stuck at low levels, it remains a guessing game as to whether the Fed will press the rate trigger at its next policy meeting.

The US economy has certainly improved, but the manufacturing sector continues to lag behind. Earlier this week, the Empire State Manufacturing Index posted its fourth straight decline, underlining worsening conditions in the manufacturing sector. In November, the indicator came in at -10.7 points, weaker than the forecast of -5.3 points. We’ll get another look at manufacturing data, with the release of the Philly Fed Manufacturing Index. This indicator has also struggled, posting two straight declines. The markets are expecting some improvement in the November report, with an estimate of 0.1 points.

 XAU/USD Fundamentals

Wednesday (Nov. 18)

•  13:00 US FOMC Member William Dudley Speaks
• 13:30 US Building Permits. Estimate 1.15M
• 13:30 US Housing Starts. Estimate 1.16M
• 15:30 US Crude Oil Inventories. Estimate 2.0M
• 19:00 US FOMC Meeting Minutes

Upcoming Key Events

Thursday (Nov. 19)

• 13:30 US Unemployment Claims. Estimate 272K
• 15:00 US Philly Fed Manufacturing Index. Estimate 0.1 points

*Key releases are highlighted in bold

*All release times are GMT

XAU/USD for Wednesday, November 18, 2015

XAU/USD November 18 at 12:10 GMT

XAU/USD 1069 H: 1072 L: 1063

XAU/USD Technical

• XAU/USD has been uneventful in the Asian and European sessions.
• 1080 remains busy and has switched to a resistance role after gold’s losses on Tuesday.
• 1043 is an immediate support level.
• Current range: 1043 to 1080

Further levels in both directions:

• Below: 1043, 1024 and 980
• Above: 1080, 1098, 1134 and 1151

OANDA’s Open Positions Ratio

XAU/USD ratio has shown movement towards short positions, as long positions retain a commanding majority (72%). This is indicative of trader bias towards gold prices moving higher.

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.