Gold Down Sharply as Fed Members Hint Hike

Gold has posted sharp losses on Wednesday, with the spot price trading at $1224.03 an ounce in the North American session. In economic news, Federal Reserve policymakers continue to make hawkish statements about the possibility of a Fed hike in the near future. US New Homes Sales climbed to 512 thousand, matching the forecast.

Gold tends to rise in times of crisis or uncertainty, and this was the case on Tuesday, as the metal jumped about 1 percent following news of a series of explosions in Brussels, which killed 33 people and wounded at least 200. The attacks took place at the international airport and a subway station, causing European stock markets to fall. Gold prices have since retracted, wiping out most of the earlier gains. The situation in Belgium remains fluid, and further developments could lead to gold showing additional volatility.

Gold prices have slipped 1.9 percent on Wednesday, as Federal Reserve policymakers have surprised the markets with hawkish statements concerning another rate hike. Last week’s policy statement appeared to pour cold water on any imminent rate hikes, but “not so fast”, according to two Federal Reserve officials. On Monday, John Williams, president of the San Francisco Fed, said that the Fed could raise rates in April and June, if economic conditions improve. Although the dot plot (an FOMC projection of rate hikes) was lowered at the March meeting, he insisted that the Fed had not changed its path of rate hikes. His comments were echoed by Atlanta Fed Dennis Lockhart, who also said that an April rate move was a clear possibility. Lockhart noted that the US economy was holding up well, despite weak global conditions. Lockart said that the economy was close to full employment and the Fed’s target of 2 percent inflation was attainable. On Wednesday, St. Louis Federal President James Bullard said that with the US unemployment rate at very low levels, the Fed could be forced to raise rates sooner rather than later.

XAU/USD Fundamentals

Wednesday (March 23)

  • 9:00 US FOMC Member James Bullard Speaks
  • 10:00 US New Home Sales. Estimate 512K. Actual 512K
  • 15:30 US Crude Oil Inventories. Estimate 2.5M. Actual 9.4M

Upcoming Key Events

Thursday (March 24)

  • 13:30 US Core Durable Goods Orders. Estimate -0.2%
  • 13:30 US Unemployment Claims. Estimate 267K

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Wednesday, March 23, 2016

XAU/USD March 23 at 13:45 DST

Open: 1248.40 Low: 1215.36 High: 1249.40 Close: 1224.03

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1169 1191 1205 1232 1255 1279
  • XAU/USD has posted losses in the Asian and European sessions. The pair has changed directions and posted slight gains in North American trade
  • 1232 has switched to a resistance role following sharp losses by XAU/USD on Wednesday
  • 1205 is providing support
  • Current range: 1205 to 1232

Further levels in both directions:

  • Below: 1205, 1191 and 1169
  • Above: 1232, 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is showing some movement towards long positions. This is consistent with the losses sustained by XAU/USD which have resulted in the covering of short positions. Long positions have a strong majority (61%), indicative of trader bias towards gold reversing directions and moving 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.