Gold Steady, CPI Posts Small Gains

Gold has edged higher on Tuesday, trading at a spot price of $1280.23 an ounce in the North American session. On the release front, Core CPI posted a small gain of 0.2%, while CPI improved to 0.4%. Both readings were within expectations. Building Permits came in at 1.12 million, very close to the forecast. On Wednesday, the Federal Reserve releases the minutes of its April policy meeting.

The US manufacturing industry continues to struggle, and very weak manufacturing data on Monday saw gold briefly climb close to the $1290 level. Empire State Manufacturing Index posted a sharp decline of 9.0 points, well off the estimate of a gain of 7.2 points. The indicator had surprised with  a gain of 9.6 points in April, and the markets were counting on another strong gain. Manufacturing continues to be a soft spot in a generally solid US economy, as weak global economic conditions and the slowdown in China have reduced demand for US-made goods.

The Federal Reserve will be under the spotlight on Wednesday, with the release of the April minutes. The Fed has sent out the message that a June hike is on the table, but the markets remain skeptical, following the soft Nonfarm Payrolls report earlier this month and Tuesday’s weak consumer inflation reports. With the economy showing mixed employment numbers and inflation stuck at low levels, a June hike would be nothing less than a shock, a reason in itself for the Fed to remain on the sidelines and avoid causing market turbulence. The markets are clearly expecting rates to remain at the current level of 0.25%, with the implied probability of a hike down to just 4%. Soft CPI numbers on Tuesday will only reinforce market sentiment that the Fed is unlikely to make a move prior to September.

WTI/USD Fundamentals

Tuesday (May 17)

• 8:30 US Building Permits. Estimate 1.13M. Actual 1.12M
• 8:30 US CPI. Estimate 0.3%. Actual 0.4%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 8:30 US Housing Starts. Estimate 1.12M. Actual 1.17M
• 9:15 US Capacity Utilization Rate. Estimate 75.1%. Actual 75.4%
• 9:15 US Industrial Production. Estimate 0.3%. Actual 0.7%

Upcoming Key Events

Wednesday (May 18)

• 14:00 US FOMC Meeting Minutes

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, May 17, 2016

XAU/USD May 17 at 11:00 EDT

Open: 1275.15 Low: 1268.74 High: 1282.12 Close: 1280.23

XAU/USD Technical

• 1279 was tested in support earlier and could break in the North American session
• There is resistance at 1303
• Current range: 1279 to 1303

Further levels in both directions:

• Below: 1279, 1255, 1232 and 1207
• Above: 1303, 1324 and 1345

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement on Tuesday. Long positions have a strong majority (59%), indicative of trader bias towards XAU/USD climbing to higher levels.

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.