XAU/USD – Gold Moving Higher, Close to 2-year High

Gold prices have posted gains on Monday, continuing the trend which marked the Friday session. Gold is trading at a spot price of $1350 per ounce in the North American session. On the release front, US markets are closed for the Fourth of July holiday.

Gold has started the new trading week with gains. The base metal touched a high of $1357 earlier on Monday, close to its highest level in two years. Gold has been one of the big winners of the Brexit referendum, 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 immediately after the Brexit vote. In June, the metal surged some 8.8 percent, and continuing uncertainty in the markets could mean that gold prices will continue to move upwards.

With the financial markets understandably focused on the stunning Brexit vote, the Federal Reserve’s monetary policy has shifted to the back-burner. That could change later this week, with the release of the Federal Reserve minutes. Will the minutes provide any clues about a rate hike? Yellen and her colleagues have sounded cautious about the US economy, and the financial instability caused by Brexit could delay any hikes until 2017. Gone are the heady days of last December, when the Fed raised rates and talked about a series of rate hikes in 2016. Meanwhile, June has come and gone, and the Fed hasn’t made a move so far this year. Bottom line? Traders shouldn’t count on an imminent rate hike to boost the US dollar; rather, the direction of the currency will largely be data-dependent – the Fed is unlikely to seriously consider any rate hikes unless we see significantly improved employment and inflation numbers.

The Brexit vote to leave the European Union continues to cause deep instability in Europe and the UK and wiped out a staggering $3 trillion from global stock markets. Although the financial markets have stabilized, the British pound has shed about 11 percent since the vote, and continued to drop last week. British politicians have sought to calm the public and the markets, but the pound’s sharp drop on Thursday underscores that the situation is anything but normal. The country’s political picture is fluid, as the Conservatives are choosing a new leader, the Labor Party is in turmoil and elections may not be far away. 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 UK may have voted “Out”, but there is no timetable as to when the exit will take place or what type of trade agreement will define the new economic relationship between the EU and Britain. British leaders are in no rush to leave, but European leaders have called on Britain to exit as soon as possible in order to minimize the uncertainty and instability caused by the Brexit vote. When it comes to the EU Britain finds itself in limbo (“neither in nor out”), and such uncertainty could bolster gold prices until some decisions are made regarding Britain’s exit from the EU.

XAU/USD Fundamentals

Monday (July 4)

  • There are no US releases on Monday

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, July 4, 2016

XAU/USD July 4 at 11:00 EDT

Open: 1342.76 Low: 1340.21 High: 1357.56 Close: 1350.69

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1279 1307 1331 1361 1388 1416
  • XAU/USD posted gains in the Asian session. The pair has shown limited movement in the European and North American sessions.
  • 1331 switched to support on Friday following strong gains by XAU/USD
  • There is resistance at 1361
  • Current range: 1331 to 1361

Further levels in both directions:

  • Below: 1331, 1307, 1279, 1255 and 1232
  • Above: 1361, 1388 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight gains in short positions, as XAU/USD continues to gain ground and cover long positions. Currently, long positions have a strong majority (60%), indicative of trader bias towards XAU/USD continuing to move 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.