Gold Remains Under Pressure, Dips Below $1250

Gold has started the week with small losses, as the metal trades at a spot price of $1246.59 an ounce in the North American session. On the release front, it’s a quiet start to the new trading week. US Flash Manufacturing PMI posted a reading of 50.5 points, short of the estimate of 51.0. On Tuesday, the US releases New Home Sales, with the estimate standing at 521 thousand.

Gold prices remains under pressure. The commodity has retreated in May, losing 3.7% of its value. On Monday, gold dipped to $1243.09, its lowest level in three  weeks. Market sentiment has increased regarding a rate hike by the Federal Reserve as soon as June, and this has weighed on gold prices. Last week’s Federal Reserve minutes were surprisingly hawkish, resulting in strong volatility in the global currency markets. The minutes indicated that a June rate hike remains firmly on the table. According to the minutes, the Fed wants to see stronger growth in the second quarter as well as better numbers from the inflation and employment fronts. If this is achieved, the Fed said it “likely would be appropriate” to raise rates at the June meeting. This message is somewhat hawkish in comparison to recent statements by Fed chair Janet Yellen, which were more cautious about the strength of the US economy. Until last week, the markets were skeptical that June would be a “live meeting”, with most analysts assuming that the Fed would continue to sit on the sidelines. The minutes have drastically changed market sentiment, however, since it’s clear that the June meeting will be a crucial one, as it could mark the Fed’s first interest rate hike this year. With the Fed saying that a key factor in a rate hike decision will be the strength of the US economy, upcoming major economic indicators will be under the market microscope, particularly inflation and employment numbers.

XAU/USD Fundamentals

Monday (May 23)

  • 6:15 US FOMC Member James Bullard Speaks
  • 9:45 US Flash Manufacturing PMI. Estimate 51.0. Actual 50.5

Upcoming Key Events

Tuesday (May 24)

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

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, May 23, 2016

XAU/USD May 23 at 13:45 EDT

Open: 1251.91 Low: 1243.09 High: 1256.14 Close: 1246.59

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1191 1207 1232 1255 1279 1303
  • XAU/USD has shown limited movement in the Monday session
  • 1232 is providing support
  • There  is resistance at 1255
  • Current range: 1232 to 1255

Further levels in both directions:

  • Below: 1232, 1207 and 1191
  • Above: 1255, 1279, 1303, 1324

OANDA’s Open Positions Ratio

On Monday, XAU/USD ratio is showing long positions with a strong majority (66%). This is indicative of trader bias towards XAU/USD reversing directions and moving 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.

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.