Gold Slide Continues over Rate Hike Speculation

Gold has recorded modest losses on Monday, as the metal trades at a spot price of $1324.04 per ounce in the North American session. On the release front, it’s a very quiet start to the week. Today’s sole economic release is the 10-year bond auction. As well, FOMC member Lael Brainard will speak about monetary policy at an event in Chicago.

Gold prices have dropped over three straight days, and the downward trend has continued in the Monday session. XAU/USD has fallen 2 percent in less than a week, as the Fed appears to be signaling its readiness to raise rates sooner rather than later. At a meeting of central bankers back last month, Fed chair Janet Yellen said that the case in favor of a rate hike had improved, given stronger US data. Ever since that speech, the markets have been fixated on the possibility of a rate hike prior to the end of 2016. On Friday, gold prices headed lower after FOMC Member Eric Rosengren said that “gradual tightening is likely to be appropriate”.

With the Federal Reserve policy meeting just over a week away, US key numbers will be under the market microscope. We’ll have to wait until Thursday and Friday for major releases, highlighted by retail sales, CPI and consumer confidence numbers. If these numbers are stronger than expected, the odds of a rate hike next week will move higher, and the dollar could make headway against its rivals. Although the US labor market remains close to capacity, many FOMC members will be reluctant to approve a rate hike based solely on strong employment numbers and will want to see stronger numbers throughout the economy. Consumer spending remains a concern, but the main sticking point is weak inflation levels, which will likely weaken even further if the Fed raises rates. The likelihood of a rate hike in 2016 has risen since last week, with the CME FedWatch Tool indicating a 24% chance for a September move and a 44% likelihood of a December hike.

XAU/USD Fundamentals

Monday (September 12)

  • 13:00 US FOMC Member Lael Brainard Speaks
  • 13:01 US 10-year Bond Auction

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, September 12, 2016

XAU/USD September 12 at 13:50 EDT

Open: 1329.57 High: 1330.18 Low: 1320.85 Close: 1324.04

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1245 1279 1307 1331 1361 1388
  • XAU/USD was flat in the Asian sessions. The pair has posted small losses in the European and North American sessions
  • 1307 is providing support
  • There is resistance at 1331
  • Current range: 1307 to 1331

Further levels in both directions:

  • Below: 1307, 1279 and 1245
  • Above: 1331, 1361, 1388 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio has been showing gains in long positions, consistent with XAU/USD continuing to lose ground. Currently, long positions have a strong majority (68%), indicative of trader bias towards XAU/USD reversing directions and moving upwards. 

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.