Gold Steadies After Sharp Gains Following Fed Statement

Gold prices have posted slight gains on Thursday, trading at a spot price of $1263.28 an ounce in the North American session. In economic news, the Philly Fed Manufacturing Index jumped 12.4 points, crushing the estimate of -1.4 points. However, US employment data was soft, as both Unemployment Claims and JOLTS Job Openings both dropped compared to their previous releases.

Gold is traditionally sensitive to monetary policy decisions, and Wednesday was no exception, as the metal jumped 2.2 percent at the conclusion of the Federal Reserve’s policy meeting. A dovish policy statement in which the Fed downgraded its projected rate hikes in 2016 bolstered the metal. Gold has sparkled in 2016, gaining 19 per cent since the start of the year. The metal has been buoyed by uncertainty in the global markets, as the Chinese slowdown and collapse in oil prices have driven many investors away from risk and towards safe-haven assets such as gold.

As expected, the Fed opted to remain on the sidelines and did not raise interest rates, maintaining the benchmark rate at 0.25%. The Fed statement noted that the US economy remains vulnerable to an uncertain global economy, but added that the Fed expects to raise rates later in the year due to moderate growth and “strong job gains”. The statement was dovish in tone, a clear departure from the December meeting, when the Fed raised rates for the first time in nine years and talked about four rate hikes over the course of 2016. In just a short three months, global demand has weakened, precipitated by the Chinese slowdown, and US numbers have cooled in comparison to the economy’s torrid pace in the second half of 2015. If inflation and employment numbers push higher in next several months, a rate hike in mid-2016 seems a good bet.

XAU/USD Fundamentals

  • 8:30 US Philly Fed Manufacturing Index. Estimate -1.4. Actual +12.4 points
  • 8:30 US Unemployment Claims. Estimate 267K. Actual 265K
  • 8:30 US Current Account. Estimate -117B. Actual -125B
  • 10:00 US JOLTS Job Openings. Estimate 5.57M. Actual 5.54M
  • 10:00 US CB Leading Index. Estimate 0.2%. Actual 0.1%
  • 10:30 US Natural Gas Storage. Estimate -9B. Actual -1B 

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Thursday, March 17, 2016

Forex Rate Graph 21/1/13

XAU/USD March 17 at 12:40 DST

Open: 1258.86 Low: 1254.42 High: 1270.93 Close: 1263.28

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1205 1232 1255 1279 1303 1322
  • 1255 has switched to support following strong gains by XAU/USD on Thursday
  • There is resistance at 1279
  • Current range: 1255 to 1279

Further levels in both directions:

  • Below: 1255, 1232, 1205 and 1191
  • Above: 1279, 1303 and 1322

OANDA’s Open Positions Ratio

XAU/USD ratio remains unchanged, as long positions maintain a slight majority (53%). This is indicative of trader bias towards gold continuing to move 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.

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.