Gold Higher, Markets Eye FOMC Meeting

Gold has posted slight gains on Monday, reversing the downward trend which marked the Friday session. Gold is trading at a spot price of $1240.75 an ounce in the North American session. On the release front, there is only one US event on the calendar. New Home Sales came in at 511 thousand, short of the estimate. On Tuesday, the US releases two major events – Core Durable Goods Orders and CB Consumer Confidence.

Gold has looked sharp in the first quarter of 2016, posting gains of some 17 percent. This marked the base metal’s strongest quarter in 30 years, a reflection of turmoil in the global economy, which has seen a sharp slowdown in China and the continued collapse of oil prices. Traditionally, gold is a safe-haven asset in times of crisis, and has climbed sharply in recent months as investors with a reduced appetite for risk have snapped up the commodity. Gold prices also tend to go down when interest rates move higher, since yield-bearing investments benefit from higher rates. With the Federal Reserve unlikely to raise rates at the conclusion of its policy meeting on Wednesday, the markets will be combing through the policy statement, looking for clues as to a hike in June. Fed chair Janet Yellen has gone out of her way in expressing caution about the health of the US economy, and if the Fed sends out a dovish message this week, gold prices could point upwards.

The US manufacturing sector remains a sore spot in the generally strong economy. Last week, the Philly Fed Manufacturing Index surprised the markets with a decline of -1.6 points, as the estimate stood at 8.1 points. This reading marked the third decline in four readings, as the manufacturing sector remains a weak area of the US economy. On Friday, US Flash Manufacturing PMI dipped to 50.8 points, shy of the forecast of 51.9 points. Although the reading did point to a slight improvement in manufacturing business conditions, it marked the PMI’s weakest release since September 2009. Uncertainty in global economic conditions has lead to weaker demand for US goods and weakened the manufacturing sector, a trend which has negatively affected producers in the US and elsewhere, such as the Eurozone and Japan. Meanwhile, the robust US labor market continues to impress. The weekly unemployment claims indicator fell to 247 thousand on Friday, well below the forecast of 265 thousand. This was the lowest weekly count since November 1973. As well, the unemployment claims four-week moving average, which is considered more accurate than the weekly indicator, also dropped compared to the previous release.

XAU/USD Fundamentals

Monday (April 25)

  • 10:00 US New Home Sales. Estimate 521K. Actual 511K

Tuesday (April 26)

  • 18:30 US Core Durable Goods Orders. Estimate 0.6%
  • 10:00 US CB Consumer Confidence. Estimate 95.8 points

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, April 25, 2016

XAU/USD April 25 at 11:15 EDT

Open: 1232.65 Low: 1230.03 High: 1242.31 Close: 1239.61

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1191 1205 1232 1255 1279 1303
  • XAU/USD was flat in the Asian session. The pair posted gains in the European session and the upward trend has continued in North American trade
  • There is resistance at 1255
  • 1232 is providing weak support. This line was tested earlier in the day
  • 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 shows long positions with a strong majority (60%), 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.

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.