Gold In Holding Pattern Ahead of Yellen Testimony

Gold is subdued on Wednesday, trading at $1188.88 an ounce in the North American session. In economic news, today’s key event takes place in Washington, as Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee. With the markets looking for clues regarding the timing of another rate hike, this event could be a market-mover, so traders should be prepared for possible volatility. The US will release Crude Oil Inventories were down by 0. 8 million, surprising the markets, which had expected a surplus of 3.1M.

Gold investors have opted for the sidelines ahead of Janet Yellen’s testimony before Congress on Wednesday. Yellen is sure to face some pointed questions from lawmakers about the health of the US economy. After a historic rate hike in December, the Fed remained on the sidelines in January, and its dovish policy statement reflected a softening in US economic growth. Does this mean a March hike is off the table? Of course, Yellen will not play her rate cards, but the markets will be looking for some clarity from Janet Yellen about the Fed’s monetary plans. Just a couple of months ago, the Fed was hinting that we could see a series of rate hikes in 2016, but the recent turmoil in global markets has drastically changed these plans, with some experts openly questioning if the Fed will make any more moves before next year.

Gold prices flirted with the symbolic $1200 line earlier in the week, and are close to their highest levels since June. Financial turbulence in early 2016, caused by the Chinese slowdown and the collapse in oil prices, has spooked investors as stock markets around the world have suffered sharp losses. This has been great news for gold, which has surged an outstanding 12 percent since the beginning of the year. The rally continued last week, as a host of key US indicators put up soft numbers, raising concerns about the strength of the US economy. If the markets are not reassured by Yellen’s testimony on Wednesday and Thursday, we could see gold resume its impressive rally.

XAU/USD Fundamentals

Wednesday (Feb. 10)

  • 10:00 Fed Chair Janet Yellen Testifies
  • 10:30 US Crude Oil Inventories. Estimate 3.1M. Actual -0.8M
  • 13:01 US 10-year Bond Auction
  • 14:00 US Federal Budget Balance. Estimate 10.3B

Upcoming Key Events

Thursday (Feb. 11)

  • 8:30 US Unemployment Claims. Estimate 287K
  • 10:00 Fed Chair Janet Yellen Testifies

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, February 10, 2016

Forex Rate Graph 21/1/13

XAU/USD February 10 at 10:50 EST

Open: 1189.03 Low: 1181.42 High: 1194.43 Close: 1188.86

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1134 1151 1175 1191 1205 1232
  • XAU/USD was flat in the Asian session. The pair posted slight losses in the European session but then reversed directions. XAU/USD has posted slight gains in North American trade.
  • 1191 has switched to a resistance role. It is a weak line and could see further action in the North American session.
  • 1175 is providing support
  • Current range: 1175 to 1191

Further levels in both directions:

  • Below: 1175, 1151 and 1134
  • Above: 1191, 1205, 1232 and 1255

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement, reflective of a lack of movement from XAU/USD. The ratio is showing a slight majority for short positions, indicative of trader bias towards the pair moving to lower 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.