Gold Remains Subdued, Markets Eye ECB Meeting

Gold continues to have an uneventful week. In Tuesday’s North American session, the metal has inched upwards and is trading at a spot price of $1332.54 per ounce. It’s a quiet day on the economic front, with the schedule comprised of two construction indicators. Building Permits matched the forecast at 1.17 million while Housing Starts was within expectations, improving to 1.19 million and climbing to a 9-month high.

With few US cues to rely on so far this week, the markets are keeping a close eye on the ECB policy meeting on Thursday. Gold prices showed some volatility following the BoE’s surprise decision not to raise rates last week.  The markets had widely expected a quarter point cut from the BoE, which would have marked the first rate cut since July 2009. BoE Mark Carney had strongly hinted at the move when he recently stated that economic conditions had deteriorated and the BoE would need to lower rates this summer. With Carney passing on a move last week, that means there is a strong chance that the BoE will lower rates at its next policy meeting on August 4. As for the ECB, despite the weak Eurozone economy and weak inflation levels, Mario Draghi & Co. are not expected to lower rates from the current level of 0.0%. At the same time, a dovish policy statement or hints about further easing from Draghi could send the euro lower and gold upwards.

US consumer indicators were on center stage on Friday, and the numbers were a mixed bag. Consumer inflation reports posted small gains of 0.2%, as inflation levels remain soft. There was better news on the consumer spending front, as Core Retail Sales posted a strong gain of 0.7%, beating the estimate. The UoM Consumer Sentiment report dipped below the 90-point level for the first time in three months, missing expectations. The Federal Reserve is unlikely to raise rates before September at the earliest, unless there is some strong improvement in economic data, particularly inflation and wage growth, which remain at low levels.

XAU/USD Fundamentals

Tuesday (July 19)

• 8:30 US Building Permits. Estimate 1.15M. Actual 1.15M
• 8:30 US Housing Starts. Estimate 1.17M. Actual 1.19M

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, July 19, 2016

XAU/USD July 19 at 12:00 EDT

Open: 1328.74 High: 1335.11 Low: 1325.60 Close: 1332.54

XAU/USD Technical

• XAU/USD has been marked by limited movement in the Tuesday session
• 1331 is fluid and has switched to a support role. It could see further action in the North American session
• 1361 is a strong resistance line
• Current range: 1331 to 1361

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Tuesday, consistent with the lack of movement from XAU/USD. Currently, long positions command a majority (65%), indicative of trader bias towards XAU/USD reversing directions and moving higher. 

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.