XAU/USD – Gold Climbs on Soft US Housing Report, Sharp Crude Inventories

Gold has continues to post gains on Wednesday, with a spot price of $1244.40 an ounce in the North American session. On the release front, US New Home Sales slid to 494 thousand, short of expectations. US Crude Inventories jumped sharply to 3.5 million, well above expectations. On Thursday, the US releases two key events – Core Durable Goods Orders and Unemployment Claims.

Gold prices have jumped some 16% in 2016, and the upward movement has continued this week. Gold received a boost on Wednesday as New Home Sales looked dismal and Crude Oil Inventories posted a strong surplus. The commodity is a traditional safe-haven, and the market turmoil affecting world markets has prodded nervous investors to flee risk and snap up safe-haven assets like gold. The collapse of oil prices and the China slowdown have hurt the economies of developed countries, which are struggling with low inflation and weak global demand. This economic turbulence has been a boon for gold, and with these economic conditions likely to continue for some time, gold could continue to register strong gains.

With the US economy showing signs of weakness in 2016, the American consumer has taken note and is less confident in economic conditions. This sentiment was underscored on Tuesday by a key indicator, CB Consumer Confidence. The indicator dropped sharply to 92.2 points in February, well off the estimate of 97.4 points and its weakest showing in three months. Weaker consumer confidence could well translate into a decrease in consumer spending, a key driver of economic growth. Meanwhile, the US manufacturing sector continues to struggle. Recent manufacturing reports have pointed to contraction in the sector, and this was again the case with the Richmond Manufacturing report, which slipped to -4 points in February, short of the forecast of +2 points. This was the indicator’s worst reading since September 2015. On Thursday, we’ll get a look at Core Durable Goods Orders, a key manufacturing indicator. The markets are braced for a small gain of 0.2%, and if this release misses the estimate, it could have a sharp impact on the currency markets

XAU/USD Fundamentals

Wednesday (Feb. 24)

• 9:45 US Flash Services PMI. Estimate 53.4 points. Actual 49.8 points
• 10:00 US New Home Sales. Estimate 522K. Actual 494K
• 10:30 US Crude Oil Inventories. Estimate 2.0M. Actual 3.5M
• 19:00 US FOMC James Bullard Speaks

Upcoming Key Events

Thursday (Feb. 25)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 8:30 US Unemployment Claims. 271K

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, February 24, 2016

XAU/USD February 24 at 11:50 EST

Open: 1230.26 Low: 1221.78 High: 1253.32 Close: 1244.40

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair posted strong gains in the European session and is showing upward movement in North American trade.
• 1232 remains busy and has switched to a support role as gold continues to climb
• There is resistance at 1255
• Current range: 1232 to 1255

Further levels in both directions:

• Below: 1232, 1205, 1191 and 1175
• Above: 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight movement towards short positions. Long positions still retain a majority (56%). This is indicative of trader bias towards gold continuing its current movement upwards.

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.