Gold Gains Continue as Markets Digest Failed Oil Summit

Gold has posted slight gains on Wednesday, continuing the upward trend which marked the Tuesday session. Gold is trading at a spot price of $1254.20 an ounce in the North American session. On the release front, US Existing Home Sales improved to 5.33 million, above the estimate of 5.29 million. Crude Oil Inventories dropped to 2.2 million, just above the forecast of 2.1 million. On Thursday, the US releases two key indicators – the Philly Fed Manufacturing Index and Unemployment Claims.

Gold prices jumped 2.0 percent on Tuesday, in response to disappointing data from the US housing sector. Building Permits, a key release, slipped to 1.09 million, its weakest level in 12 months. There was no relief from Housing Starts, which also fell to 1.09 million, well short of the estimate of 1.17 million. Although the labor market is close to full capacity and consumer confidence remains at high levels, the housing sector has not kept up. However, there was better news on Wednesday, as Existing Home Sales rebounded in March and beat the estimate. Another sore spot in the US economy is the manufacturing sector. Uncertainty in global economic conditions has lead to weaker demand for US goods and put the squeeze on domestic manufacturers. There was some positive news on Friday, as the Empire State Manufacturing Index climbed 9.6 points in April, crushing the estimate of 2.1 points. It was the indicator’s highest level since January 2015. We’ll get a look at the Philly Fed Manufacturing Index, a key manufacturing report, on Thursday.

Oil prices have shown strong volatility since the weekend, when oil producers attended a meeting in Qatar on Sunday. The gathering, which included OPEC and non-OPEC nations, ended in disarray, without any agreement being reached by the participants. There was optimism that the parties might agree to maintain current production levels, but hopes for even this limited move were dashed when Saudi Arabia insisted that any agreement had to cover Iran. When this didn’t materialize, the participants closed up shop and returned home. The failure of the talks could severely undermine the credibility of oil producers, and the huge oversupply of crude could worsen if Saudi Arabia and other suppliers decide to increase output. Oil prices have zigzagged since the weekend. Initially, prices sagged after the inconclusive oil meeting, but have since rebounded sharply.

XAU/USD Fundamentals

Wednesday (April 20)

• 10:00 US Existing Home Sales. Estimate 5.29M. Actual 5.33M
• 10:30 US Crude Oil Inventories. Estimate 2.2M. Actual 2.1M

Upcoming Key Events

Thursday (April 21)

• 8:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
• 8:30 US Unemployment Claims. Estimate 265K

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, April 20, 2016

XAU/USD April 20 at 12:00 EDT

Open: 1251.50 Low: 1247.19 High: 1259.80 Close: 1254.20

XAU/USD Technical

• 1255 remains a fluid line. Currently it is a resistance line and could break in the North American session
• 1232 is providing support
• Current range: 1232 to 1255

Further levels in both directions:

• Below: 1232, 1205, 1191 and 1165
• Above: 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged, consistent with the lack of movement from XAU/USD. Long positions command a strong majority (58%), indicative of trader bias towards gold continuing to move higher.

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.