Gold Climbs as Expectations of June Hike Fading

Gold has posted strong gains on Wednesday, as the pair trades at $1260.20 in the North American session. This marks the metal’s highest level in 3 weeks. On the release front, JOLTS Jobs Openings improved to 5.79 million, easily beating expectations. Crude Oil Inventories posted a strong decline of 3.2 million barrels, matching the forecast. On Thursday, the US releases Unemployment Claims.

After several soft employment numbers, there was growing unease about the strength of the US labor market. On Friday, Nonfarm Payrolls plunged to a paltry 38 thousand, shocking the markets and sending the US dollar tumbling. On Monday, the Labor Market Conditions Index dropped 4.9 points, marking a fourth consecutive decline. This was followed by Revised Nonfarm Productivity, which dropped 0.6%. The markets were braced for a weaker reading from JOLTS Job Openings on Wednesday, but the indicator improved to 5.79 million, easily beating the forecast of 5.67 million. We’ll get a look at Unemployment Claims on Thursday, with the estimate standing at 269 thousand, little changed from the previous reading.

Gold has climbed 1.2% on Wednesday, as hopes have faded that the Federal Reserve will raise interest rates at its policy meeting next week. Fed Chair Janet Yellen delivered a closely-watched speech on Monday, but the markets were disappointed with her lack of specifics. Speaking at the World Affairs Council in Philadelphia, Yellen said she remained optimistic about the US economy and hinted that the Fed would raise interest rates, but crucially, she gave no indication as to when that might occur. This omission was in sharp contrast to her remarks just over a week ago, when she declared that a hike would likely be appropriate “in the coming months”. Yellen was cautious in her tone on Monday, saying “[i]f incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective as I expect, further gradual increases in the Federal Funds Rate are likely to be appropriate”.  Yellen played down the dismal Nonfarm Payroll report, saying that the markets shouldn’t attach too much significance to one soft report. The markets had lowered expectations for a June rate hike, and Yellen’s speech has all but priced out a June move. However, a rate increase in July or September remains on the table, and any decision by the Fed to raise or maintain rates will be data-dependent, particularly inflation and employment data.

XAU/USD Fundamentals

Wednesday (June 8)

• 10:00 US JOLTS Job Openings. Estimate 5.67M. Actual 5.79M
• 10:30 US Crude Oil Inventories. Estimate -3.2M. Actual -3.2M
• 13:01 US 10-year Bond Auction

Upcoming Key Events

Thursday (June 9)

• 8:30 US Unemployment Claims. Estimate 269K

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, June 8, 2016

XAU/USD June 8 at 12:40 EDT

Open: 1243.95 Low: 1243.07 High: 1264.39 Close: 1260.20

XAU/USD Technical

• XAU/USD posted gains in the Asian, European sessions. The pair has been steady in North American trade.
• 1255 remains fluid and has switched to a support role following strong gains by XAU/USD in the Wednesday session.
• There is resistance at 1279
• Current range: 1255 to 1279

Further levels in both directions:

• Below: 1255, 1232, 1207 and 1191
• Above: 1279, 1307 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio is showing gains by long positions on Wednesday. Long positions maintain a strong majority (70%), indicative of trader bias towards XAU/USD continuing to climb 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.