Gold Under Pressure on Fed Rate Talk

Gold is steady on Thursday, with the spot price trading at $1220.50 an ounce in the North American session. In economic news, Unemployment Claims came in at 267 thousand, within expectations. However, US durable goods reports pointed to declines, disappointing the markets. On Friday, the US releases Final GDP, a key indicator which could move the markets. The forecast stands at 1.0%.

Gold prices slipped about 2 percent on Wednesday, as Federal Reserve policymakers surprised the markets with hawkish statements concerning another rate hike. Last week’s policy statement appeared to rule out any imminent rate hikes, but since then a host of Fed members have publicly expressed support for a rate hike as early as April. 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. There was further support for rate hikes from two other Fed presidents, Patrick Harker and James Bullard. Harker said that given the strong economy, the Fed should consider raising interest rates as early as the April meeting, and added that he favored at least three rate hikes during the year. On Wednesday, Bullard said that with the US unemployment rate at very low levels, the Fed could be forced to raise rates sooner rather than later. Given these statements, traders should treat an April move by the Fed as a reasonable possibility, with US employment and inflation numbers having a huge say on the Fed’s decision. A rate hike would make the US dollar more attractive to investors, hurting other assets such as gold.

XAU/USD Fundamentals

Thursday (March 24)

  • 8:15 US FOMC Member James Bullard Speaks
  • 8:30 US Core Durable Goods Orders. Estimate -0.2%. Actual -1.0%
  • 8:30 US Unemployment Claims. Estimate 267K. Actual 265K
  • 8:30 US Durable Goods Orders. Estimate -3.0%. Actual -2.8%
  • 9:45 US Flash Services PMI. Estimate 51.3. Actual 51.0
  • 10:30 US Natural Gas Storage. Estimate 20B. Actual 15B

Upcoming Key Events

Friday (March 25)

  • 12:30 US Final GDP. Estimate 1.0%

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Thursday, March 24, 2016

XAU/USD March 24 at 11:35 DST

Open: 1248.40 Low: 1212.23 High: 1249.40 Close: 1220.50

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1169 1191 1205 1232 1255 1279
  • XAU/USD has posted losses in the Asian session but recovered in European trade. The pair is steady in the North American session.
  • There is resistance at 1232
  • 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 unchanged. Long positions have a strong majority (60%), 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.