Gold Steady, US GDP Meets Expectations

This week’s gold rally has taken a pause, as spot gold trades at $1073.19 per ounce in the North American session. In the US, Final GDP posted a solid gain of 2.0%. Existing Houses Sales disappointed, while the Richmond Manufacturing Index beat expectations.

There hasn’t been much to cheer about when it comes to gold, as the metal is on track to record another negative year in 2015. Still, gold has rallied since late last week, posting gains of 2 percent. Gold took a hit in the aftermath of the Federal Reserve’s rate hike, and briefly dropped below the $1050 level, marking its lowest level since February 2010. However, gold has rallied since then, posting gains of 2 percent. This strong performance stands in marked contrast to oil as well as the major currencies. Will we see gold resume its rally?

After keeping the markets in suspense for months, the Federal Reserve took the plunge last week and raised interest rates by 0.25 percent last week, the first upward move since June 2006. The Fed dropped a broad hint in its October policy meeting about a rate hike before the end of 2015, and predictably, investors and traders were busy trying to guess whether the Fed would indeed press the rate trigger. To the credit of Fed chief Janet Yellen and her colleagues, the Fed put into place a carefully-crafted strategy, sending a steady of stream of signals that it was intending to tighten monetary policy, if economic conditions remained positive. This gave the markets ample time to price in a rate hike, and currency market volatility was not excessive after the US rate hike, the first in almost 10 years. Although a hike of 0.25 percent is expected to have limited economic impact, the psychological aspect of the rate move cannot be overemphasized, as the Fed has given the US economy a critical vote of confidence. As well, this move is expected to be the first in a series of incremental rate hikes over the course of 2016.

XAU/USD Fundamentals

Tuesday (Dec. 22)

  • 13:30 US Final GDP. Estimate 1.9%. Actual 2.0%
  • 13:30 US Final GDP Price Index. Estimate 1.3%. Actual 1.3%
  • 14:00 US HPI. Estimate 0.4%. Actual 0.5%
  • 15:00 US Existing Home Sales. Estimate 5.32M. Actual 4.76M
  • 15:00 US Richmond Manufacturing Index. Estimate -1 point. Actual 6 points

*Key Events are in Bold

*All release times are GMT

XAU/USD for Tuesday, December 22, 2015

Forex Rate Graph 21/1/13

XAU/USD December 22 at 18:50 GMT

XAU/USD 1073.19 H: 1080 L: 1072

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1024 1043 1080 1098 1134 1151
  • XAU/USD was flat in the Asian session. The pair has posted slight losses in the European and North American sessions.
  • 1080 was tested earlier in support and remains under pressure.
  • There is resistance at 1098.
  • Current range: 1080 to 1098

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged on Tuesday. Long positions continue to command a solid majority (71%), indicative of strong trader bias towards gold prices continuing to move to higher levels.

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.