Gold Loses Ground, US Employment Report Beats Forecast

Gold prices continue to soften this week. In Tuesday’s North American session, gold is trading at $1086.30 an ounce. On the release front, the markets were treated to more good news from US employment releases. JOLTS Job Openings, an important indicator, improved to 5.43 million, beating the forecast.

Gold posted sharp gains last week, the beneficiary of a move by jittery investors who snapped up safe-haven assets like gold, shunning any risky assets. The week started with poor Chinese data, and tensions in the Middle East and North Korea bolstered the base metal. A surprise devaluation of the yuan by Chinese authorities helped propelled gold to a high of $1111 last week, its highest level since November 2014. However, it’s been a completely different story this week, as gold as slipped 2.3% percent in value. The reversal in gold’s fortunes are largely due to an improvement in the situation in China, with the stock markets and the yuan recovering this week. Still, gold has gained a respectable 3 percent in January, as nervous investors keep a worried eye over events in China and geopolitical uncertainties.

US employment numbers continue to shine, underscoring a robust US labor market. On Tuesday, JOLTS Job Openings improved to 5.43 million, beating the estimate of 5.41 million and above the previous reading of 5.38 million. Late last week, Nonfarm Employment Change surged to 292 thousand, crushing the estimate of 203 thousand. This was the strongest reading in 10 months. The unemployment rate remained unchanged at 5.0%, within the Federal Reserve’s definition of “full employment”. One area of concern in the employment picture is that of wage growth, which has not kept up with the strong improvement in payrolls. Even if the US economy is technically at “full employment”, slack remains in the labor market, meaning that employers are not feeling under any pressure to raise wages. This was underscored by the Average Hourly Earnings in December, which posted a flat reading of 0.0%, short of the forecast of 0.2%. This key event is a leading indicator of consumer inflation, meaning that wages must increase before consumers will spend more, thus leading to more inflation. The minutes from the Federal Reserve’s last policy meeting indicated that inflation remains a key concern of policymakers, and inflation levels will play an important role in the timing and size of upcoming rate hikes in 2016.

XAU/USD Fundamentals

Tuesday (Jan. 12)

  • 5:30 US FOMC Member Stanley Fischer Speaks
  • 6:00 US NFIB Small Business Index. Estimate 95.4 points
  • 10:00 US JOLTS Job Openings. Estimate 5.41M. Actual 5.43M
  • 10:00 US IBD/TIPP Economic Optimism. Estimate 47.6 points
  • 21:00 US President Barack Obama Speaks

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, January 12, 2016

Forex Rate Graph 21/1/13

XAU/USD January 12 at 17:15 GMT

Open: 1095.69 Low: 1083.19 High: 1098.80 Close: 1083.19

 

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 posted losses in European trade and has been choppy in the North American session.
  • 1098 has switched to a resistance role as the pair trades at lower levels
  • 1080 is providing support
  • Current range: 1080 to 1098

Further levels in both directions:

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

 

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little change on Tuesday. Long positions continue to retain a solid majority (64%), indicative of strong trader bias towards gold prices reversing directions 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.