Gold Rally Continues, Punches Past $1300

Gold has posted slight gains on Thursday, continuing the trend seen we have seen for most of the week. XAU/USD is trading at $1301.73 in the North American session. In economic news, consumer inflation was soft but within expectations, as Core CPI and CPI both posted small gains of 0.2%. The Philly Fed Manufacturing Index beat expectations, but Unemployment Claims was higher than expected. On Friday, the US releases Building Permits, a key release.

The Federal Reserve was center stage on Wednesday, but there was no surprises as the Fed opted for the sidelines and held the benchmark rate at 0.25%, where it has been pegged since December 2015. A dismal Nonfarm Payrolls report and dovish statements from Fed chair Janet Yellen and her colleagues had all but decimated any chance of a June hike. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. The Fed’s tone has drastically changed since then, and there is a strong likelihood that the Fed will raise rates only once in 2016. The Fed statement did not shed any light on the timing of a rate hike, although many analysts are circling September in their calendars. The statement was cautious in tone, stating that the Fed expects US inflation levels to remain at low levels in the near term. As well, the Fed lowered its rate path outlook for 2016 and 2017. Gone are the heady days of December, when the Fed hinted that it could raise rates up to four times in 2016. Many analysts were skeptical about this rosy (brash?) prediction, and it appears that the Fed was overly optimistic about the strength of the US economy, as June has arrived and we are yet to see a rate hike in 2016.

Gold prices continue to move higher, as XAU/USD touched a high of $1315, its highest level since August 2014. The metal has enjoyed a solid June, surging 7.0 percent since the start of June. Much of the gains have revolved around recent dovish statements from Fed chair Janet Yellen and her colleagues, and the downward trend continued after the Fed maintained rate levels at the Wednesday policy meeting. As well, a dismal Nonfarm Payrolls report at the beginning of the month raised concerns about the US labor market and sent gold prices sharply higher. The Brexit referendum on June 23, in which the UK will vote on remaining in the European Union, has helped boost gold, as the uncertainty of the outcome has spooked investors who have dumped risky assets and snapped up safe-haven assets such as gold.  There is continuing uncertainty over the Brexit referendum, as the “Leave” camp has gained strength in recent polls.  The referendum has ramifications for the global economy, and key figures are weighing in on the repercussions if the UK votes to exit the EU. British Prime Minister David Cameron, Germany chancellor Angela Merkel and International Monetary Fund managing director Christine Lagarde have warned that a British departure could hurt the global economy. Federal Reserve Chair Janet Yellen has also weighed in, stating on Wednesday that the Brexit referendum was a factor in the Federal Reserve’s decision not to raise interest rates.

XAU/USD Fundamentals

Thursday (June 16)

  • 8:30 US CPI. Estimate 0.3%. Actual 0.2%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
  • 8:30 US Philly Fed Manufacturing Index. Estimate 1.1. Actual 4.7
  • 8:30 US Unemployment Claims. Estimate 267K. Actual 277K
  • 8:30 US Current Account. Estimate -125B. Actual -125B
  • 10:00 US NAHB Housing Market Index. Estimate 59. Actual 60
  • 10:30 US Natural Gas Storage. Estimate 66B. Actual 69B

Friday (June 17)

  • 8:30 US Building Permits. Estimate 1.15M

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Thursday, June 16, 2016

XAU/USD June 16 at 12:40 EDT

Open: 1293.70 Low: 1293.58 High: 1315.63 Close: 1301.73

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1232 1255 1279 1307 1331 1361
  • XAU/USD posted gains in the Asian session and was choppy in the European session. The pair has posted losses in North American trade
  • 1279 is providing support
  • There is resistance at 1307
  • Current range: 1279 to 1307

Further levels in both directions:

  • Below: 1279, 1255, 1232 and 1207
  • Above: 1307, 1331 and 1361

OANDA’s Open Positions Ratio

XAU/USD ratio has showed slight movement towards long positions on Thursday. Currently, long positions maintain a majority (54%), indicative of trader bias towards XAU/USD continuing to rise 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.