Gold Steady at $1320, Markets Eye BoJ, Fed Meetings

Gold has edged lower on Monday, as the metal trades at a spot price of $1320.49 per ounce in the North American session. It’s a quiet start to the trading week, with no US releases on the schedule. On Tuesday, there are two key releases, CB Consumer Confidence and New Home Sales.

We could see some volatility from gold this week, as the Japanese and US central banks release statements later this week. However, the two banks are moving in opposite directions as far as monetary stance. The Federal Reserve is not expected to raise rates, but markets players will be playing close attention to the Fed policy statement, looking for clues regarding a rate hike later in the year. With the US economy showing some stronger numbers, speculation has risen that the Fed will seriously consider a rate hike before the end of 2016. . However, the Fed will be hesitant to make a move if inflation remains stuck at very low levels, nowhere near the Fed’s target of around 2 percent.

It’s a starkly different story in Japan. With a struggling economy mired in deflation, the Bank of Japan is under strong pressure to adopt further easing moves. Last week, BoJ Governor  BoJ Governor Haruhiko Kuroda flatly rejected the use of “helicopter money” – or increasing the budget deficit by a permanent increase in monetary base – in order to combat deflation. This tool is seen as an alternative to quantitative easing and some economists have suggested it could be used in Japan, with interest rates in negative territory and the economy in danger of recession. Kuroda added that the bank has not changed its stance of adopting further easing by way of quantitative easing, qualitative easing or lowering interest rates. Lower rates would make yen-priced assets less attractive, so if the BoJ does lower rates this week, investors would likely snap up gold at the expense of the Japanese currency.

XAU/USD Fundamentals

  • There are no releases on Monday

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, July 25, 2016

XAU/USD July 25 at 12:00 EDT

Open: 1312.74 High: 1331.05 Low: 1310.76 Close: 1320.49

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1255 1279 1307 1331 1361 1388
  • XAU/USD posted small losses in the Asian session. The pair was flat in the European session and has posted gains in North American trade.
  • There is resistance at 1331
  • 1307 is providing 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

On Monday, XAU/USD ratio is showing long positions with a majority (67%). This is indicative of trader bias towards XAU/USD reversing directions and gaining ground. 

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.