Gold Slips to New July Low on Renewed Hopes for Fed Hike

Gold has recorded considerable losses on Wednesday. In the North American session, the metal is trading at a spot price of $1319.05 per ounce. On the release front, it’s a very light day, with just one event on the schedule – Crude Oil Inventories. The indicator posted a decline of 2.3 million, well off the estimate of 1.3 million. Thursday will be busy, with the US releasing unemployment claims as well as manufacturing and housing numbers.

Gold prices are down about 1 percent on Wednesday, as the metal dropped to $1313, its lowest level this month. With the US posting solid retail sales and housing data in recent week, sentiment has increased sharply that the Federal Reserve could raise rates before the end of the year. The markets have priced in a 47% chance of a rate hike by December, compared with to just 9% at the start of this month. Still, key employment and inflation numbers will probably have to improve before the Fed is convinced that the economy can withstand another rate increase.

Other central banks besides the Fed continue to hold the attention of the markets. Last week, the BoE surprised the markets and held off from lowering rates. Will the ECB make a move at its policy meeting on Thursday? The ECB is under pressure to adopt further monetary easing, but the markets are not expecting a rate cut from the current rate of 0.00%. Still, a dovish rate statement or any hints about further easing from Mario Draghi could push the euro downwards. The situation has become further complicated with the recent Brexit vote, as Britain, the second largest economy in Europe, will be soon be waving goodbye to the EU. This move (and the negotiations preceding it) are bound to have profound economic ramifications on both Britain and the EU and could result in significant volatility in the currency and commodity markets.

XAU/USD Fundamentals

Wednesday (July 20)

  • 10:30 US Crude Oil Inventories. Estimate -1.3M. Actual -2.3M

Thursday (July 21)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 5.1
  • 8:30 US Unemployment Claims. Estimate 271K
  • 10:00 US Existing Home Sales. Estimate 5.48M

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, July 20, 2016

XAU/USD July 20 at 13:20 EDT

Open: 1332.89 High: 1338.43 Low: 1313.53 Close: 1319.05

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1255 1279 1307 1331 1361 1388
  • XAU/USD was flat in the Asian session. The pair posted strong gains in the European session and is showing limited movement in North American trade
  • 1331 has switched to a resistance role following losses by XAU/USD
  • 1307 is proving support
  • Current range: 1307 to 1331

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Wednesday. Currently, long positions command a majority (64%), 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.

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.