Gold Rallies Above $1100

Gold prices continue to rise, extending gains for a fourth straight session. In the North American session, gold is trading at $1108.40. On the release front, today’s key event was Unemployment Claims. The indicator was weaker than expected, with a reading of 271 thousand. The markets have shifted their attention to the December Nonfarm Payrolls report, which will be released on Friday. The markets are expecting a weaker reading than the November release, with the estimate standing at 203 thousand.

It’s been an outstanding start to the New Year for gold, as the base metal has jumped over 4 percent in value this week. Gold is now trading at its highest level since early November 2014. Why are gold prices moving higher? Nervous investors have sought safe-haven assets, such as gold, throughout the week. This trend started following weak Chinese manufacturing data early in the week, which underscored the slowdown affecting the world’s second largest economy. Rising tensions between Saudi Arabia and Iran and a surprise nuclear device test by North Korea raised markets jitters and led to further gains for gold. Finally, China’s surprised the markets by devaluing its currency, the yuan, by over 0.5%. This move has led to sharp declines on the global stock markets and has further reduced investors’ appetite for risk in favor of safe-haven assets.

US job data started off 2016 in style, as ADP Nonfarm Payrolls jumped to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014.Unemployment Claims were not as strong, as the reading of 277 thousand missed the estimate of 271 thousand. Still, the four-week average of jobless claims, a more accurate gauge of unemployment levels, remains strong. Elsewhere, the ISM Non-Manufacturing PMI came in at 55.3 points, short of the estimate of 56.0 points. However, this reading points to solid expansion in the services sector and underscores that the US economy is headed in the right direction.

Meanwhile, the Federal Reserve released the minutes of its December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call because of concerns over persistently low inflation readings. The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, but US inflation levels will play an important role in the timing and size of future rate hikes.

XAU/USD Fundamentals

Thursday (Jan. 7)

  • 7:30 US Challenger Job Cuts. Actual -27.6%
  • 8:30 US Unemployment Claims. Estimate 271K. Actual 277K
  • 10:30 US Natural Gas Storage. Estimate -95B. Estimate -113B

Friday (Jan. 8)

  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 203K
  • 8:30 US Unemployment Rate. Estimate 5.0%

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, January 7, 2016

Forex Rate Graph 21/1/13

XAU/USD January 7 at 16:25 GMT

XAU/USD 1108.00 H: 1109.00 L: 1091.09

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1043 1080 1098 1134 1151 1175
  • XAU/USD has posted gains throughout the day
  • 1098 has switched to a support role as gold continues to move higher
  • There is resistance at 1134
  • Current range: 1098 to 1134

Further levels in both directions:

  • Below: 1098, 1080, 1043 and 1024
  • Above: 1134, 1151 and 1175

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight gains by short positions. Still, long positions continue to command a solid majority (71%), indicative of strong trader bias towards gold prices continuing to move 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.

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.