XAU/USD – Gold Remains Subdued as Markets Digest Fed Decision

Gold has ticked higher on Monday, continuing the lack of movement we saw late last week. In the North American session, the metal is trading at a spot price of $1340.06 per ounce. On the release front, it’s a very quiet start to the week, with just one economic indicator on the schedule. New Home Sales dropped to 609 thousand, but this was enough to beat the forecast of 598 thousand. FOMC member Daniel Tarullo will speak at an event in New Haven. On Tuesday, the US releases CB Consumer Confidence, a key consumer indicator.

Gold posted strong gains after the Federal Reserve’s announcement on Wednesday, and has consolidated these gains as it currently trades at $1340. As widely expected, the Fed maintained the benchmark interest rate at 0.25%, where it has been pegged since last December. In a highly unusual step, however, three of the ten FOMC members dissented with the decision to hold rates, preferring to raise rates immediately by a quarter-percentage point. This was the first time since December 2014 that three FOMC voting members have dissented with the Fed rate decision. This significant dissent within the FOMC underscores continuing divisiveness within the Fed, with one economist calling the Fed decision “one of the most decisive FOMC meetings in recent memory”. Recent comments from FOMC members regarding a rate hike have conflicted with each other, and the mixed messages have left the markets confused. The surprising level of dissent in Wednesday’s Fed announcement will do little to restore market confidence in the Fed, which back in December 2016 promised up to four rate hikes in 2016, but so far has yet to raise rates this year.

The Fed sent a hawkish message to the markets in its policy statement, hinting broadly at a December rate hike. The Fed stated that “the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Reading between the lines, the Fed is looking for stronger inflation numbers, and upcoming inflation indicators (as well as consumer spending and employment) will have a significant impact on the odds of a December rate hike. As far as future rate moves, the Fed was dovish, scaling back projections for 2017 from three to two hikes and lowering its longer-run interest rate forecast to 2.9 percent from 3.0 percent.

XAU/USD Fundamentals

Monday (September 26)

  • 10:00 US New Home Sales. Estimate 598K. Actual 609K
  • 11:45 FOMC Member Daniel Tarullo Speaks

Tuesday (September 27)

  • 10:00 CB Consumer Confidence. Estimate 98.6

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, September 26, 2016

XAU/USD September 26 at 13:30 EDT

Open: 1338.38 High: 1342.17 Low: 1332.72 Close: 1340.06

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1279 1307 1331 1361 1388 1416
  • XAU/USD was posted slight losses in the Asian session but recovered in the European session. The pair is showing little movement in North American trade
  • 1331 is providing support
  • 1361 is an immediate resistance line
  • Current range: 1331 to 1361

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is currently showing long positions with a substantial majority (61%). This is indicative of trader bias towards XAU/USD continuing to move 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.