Gold Dips Below $1100

Gold has started the new trading week with slight losses. In Monday’s North American session, gold is trading at $1097.60 an ounce. On the release front, there is only one event on the schedule. The Labor Market Conditions Index jumped to 2.9 points, its highest reading in 10 months.

It’s been an outstanding start to the New Year for gold, which recorded gains last week of $34.50, or 3.54 percent. Gold prices remain close to their highest level since early November 2014. Why are gold prices moving higher? Jittery investors scurried to safe-haven assets last week, which allowed  gold, a safe-haven commodity, to surge. 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.

The US economy continues to roll, with much of that success due to the strong employment market. On Friday, US Nonfarm Payrolls surged to 292 thousand, crushing the estimate of 203 thousand. This was the key indicator’s highest gain in 10 months. The unemployment rate remained unchanged at 5.0 percent. The positive news continued on Monday, as Labor Market Conditions Index jumped to 2.9 points in December, up from 0.5 points a month earlier. It was the indicator’s best showing since February 2015. The Fed will probably not make another move at its policy meeting at the end of January, so soon after the historic rate hike in December. However, many experts are expecting that the Fed will raise interest rates in March. Such a move would likely make the US dollar assets more attractive to investors and boost the greenback against its rivals. If the US economy continues to heat up, the Fed is expected to continue to tighten monetary policy over the course of 2016.

The Federal Reserve released the minutes of its historic 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 that low inflation levels will continue in 2016. What’s next? The Fed has hinted that the December rate hike was the first of a series of incremental moves in 2016, but inflation levels will play an important role in the timing and size of future rate hikes.

XAU/USD Fundamentals

Monday (Jan. 11)

  • 10:00 US Labor Market Conditions Index. Actual 2.9 points

*All release times are GMT

*Key events are in bold

XAU/USD for Monday, January 11, 2016

Forex Rate Graph 21/1/13

XAU/USD January 11 at 14:50 GMT

XAU/USD Open: 1106.40 Low: 1096.00 High: 1108.30 Close: 1098.60

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1043 1080 1098 1134 1151 1175
  • XAU/USD has been marked by choppy trading for much of the day
  • 1098 is under strong pressure in support
  • 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 shows long positions with a solid majority (66%), indicative of strong trader bias towards gold prices reversing direction and 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.

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.