Gold Dips as US GDP, Consumer Confidence Beats Estimate

Gold prices have dipped on Tuesday, following the trend seen in the Tuesday session. Gold is trading at a spot price of $1313.91 per ounce in the North American session. On the release front, US Final GDP posted a gain of 1.1%, within expectations. The CB Consumer Confidence report improved to 98.0 points, well above the estimate.

In the US, GDP was revised upwards in the first quarter. Final GDP for the first quarter posted a gain of 1.1%, above the estimate of 1.0%. This reading was stronger than the Preliminary GDP reading of 0.8%. Although the upward revision was welcome news, the revised GDP report marked the weakest gain in a year. On the consumer front, CB Consumer Confidence impressed by climbing to 98.0 points, easily beating the forecast of 93.2 points. Is US consumer confidence strengthening? It’s not clear, as last week’s UoM Consumer Sentiment report dropped to 93.4 points and missed expectations. Consumer confidence is closely linked to consumer spending, and we’ll get a look at Personal Spending on Wednesday.

Gold has emerged as a big winner of the Brexit referendum on Friday, as financial markets dropped sharply after the stunning news that Britain had voted to exit the European Union.  Gold took full advantage of the chaos, surging a remarkable 7.1 percent on Friday. The metal has given up a bit of ground this week, as market sentiment has improved as the dust begins to settle from the shock of Brexit. Gold has dipped on Tuesday, as US GDP was revised upwards and a key consumer report beat expectations. Final GDP for the first quarter posted a gain of 1.1%, above the estimate of 1.0%. This reading was stronger than the Preliminary GDP reading of 0.8%. Although the upward revision was welcome news, the revised GDP report marked the weakest gain in a year. On the consumer front, CB Consumer Confidence impressed by climbing to 98.0 points, easily beating the forecast of 93.2 points. Is US consumer confidence strengthening? It’s not clear, as last week’s UoM Consumer Sentiment report dropped to 93.4 points and missed expectations. Consumer confidence is closely linked to consumer spending, and we’ll get a look at Personal Spending on Wednesday.

With the aftershocks of the Brexit vote continuing to reverberate in the Britain and Europe, political leaders must now pick up the pieces and deal with the radical new landscape, which was unthinkable just a few months ago – that of a European Union without Britain. The historic decision raises many questions and has resulted in political and financial instability in Europe and the UK, and wiped out a staggering $3 trillion from global stock markets. The British pound has tumbled about 11 percent since the vote, and the Australian dollar took a hit as well, as investors dumped risky assets in favor of safe-haven assets like gold and the Japanese yen. Chancellor of the Exchequer George Osborne and Bank of England Governor Mark Charney have sought to reassure the markets and the public that the situation is under control, but is it? The political picture is fluid, with Prime Minister Cameron resigning, the Labor Party in turmoil, and general elections likely later in the year. On the financial front, the pound and the markets have taken a beating, and London’s position as a world financial center has been shaken. The uncertainty is not going to disappear anytime soon, so traders should be prepared for further volatility in the currency markets.

British Prime Minister Cameron is meeting with his EU colleagues in Brussels for a 2-day summit, and already there are signs that this divorce between Britain and the EU could be rancorous and messy. Cameron said on Monday that his successor would be the one to initiate the exit mechanism, and other British politicians have said there is no rush to leave. However, European lawmakers, furious with the decision, have called on Britain to leave as soon as possible. Britain may have voted “Leave”, but clearly the timing and the type of exit plan remain unclear. The future framework of political and economic relations between the UK and the continent will have to be negotiated, and we will see plenty of uncertainty and perhaps fireworks in the coming months.

 

XAU/USD Fundamentals

Tuesday (June 28)

  • 8:30 US Final GDP. Estimate 1.0%. Actual 1.1%
  • 8:30 US Final GDP Price Index. Estimate 0.6%. Actual 0.4%
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.5%. Actual 5.4%
  • 10:00 US CB Consumer Confidence. Estimate 93.2. Actual 98.0
  • 10:00 US Richmond Manufacturing Index. Estimate 2 points. Actual -7 points
  • 19:00 US FOMC Member Jerome Powell Speaks

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, June 28, 2016

XAU/USD June 28 at 11:20 EDT

Open: 1324.57 Low: 1305.53 High: 1325.96 Close: 1313.91

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1255 1279 1307 1331 1361 1388
  • XAU/USD posted small losses in the Asian and European sessions. The pair is flat in the North American session
  • 1307 is providing weak support
  • There is resistance at 1331
  • Current range: 1307 to 1331

Further levels in both directions:

  • Below: 1307, 1279, 1255 and 1232
  • Above: 1331, 1361 and 1388

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Tuesday, consistent with the lack of significant movement from XAU/USD. Long positions have a majority (64%), 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.