XAU/USD – Gold Unchanged, Markets Eye CPI, Jobless Claims

Gold prices are almost unchanged on Wednesday. In the North American session, the metal is trading at $1226.19. On the release front, today’s highlight was PPI. The inflation index came in at a flat 0.0%, short of the forecast of 0.3%. On Thursday, the markets will have plenty of data to digest. There are a host of major US events, led by October CPI numbers. As well, Fed chair Janet Yellen will testify before the Congressional Joint Economic Committee.

Gold has taken a sharp hit, as the metal has declined 4.7 percent since November 7. Gold has been under pressure this week as well, but have managed to bounce back and hold its own against the dollar, which has enjoyed significant, broad gains since the US election. As the shock subsides from last week’s historic upset, what can we expect from President Trump? Market sentiment is currently very favorable towards the dollar, as a Trump presidency (together with a Republican-controlled Congress) could signal a looser fiscal policy and a cut in taxes. This would likely result in greater inflation, which would lead to higher interest rates and hence a stronger dollar. At the same time, Trump is a political enigma, and aside from being “pro-business” he has been very short on specifics with regard to an economic platform. This lack of certainty means the markets could be in for plenty of surprises which could translate into volatility in the currency markets.

The Federal Reserve meets again in December and expectations are sky-high that the Fed will press the trigger and raise rates by a quarter-point for the first time in a year. There have been several false starts before, but this time should be different. The Fed has sent out strong signals that it will raise rates, and in the past two rate decisions, some FOMC members voted for an immediate rate hike. The odds of a rate rise currently stand at a remarkable 90 percent, so barring some sharp negative data out of the US, we appear headed for a rate hike before the end of 2016.

Fed Hike Odds Near 100%

XAU/USD Fundamentals

Wednesday (November 16)

• 3:05 US FOMC Member James Bullard Speech
• 8:30 US PPI. Estimate 0.3%. Actual 0.0%
• 8:30 US Core PPI. Estimate 0.2%. Actual -0.2%
• 9:15 US Capacity Utilization Rate. Estimate 75.5%. Actual 75.3%
• 9:15 US Industrial Production. Estimate 0.2%. Actual 0.0%
• 10:00 US NAHB Housing Market Index. Estimate 63 points. Actual 63 points
• 10:30 US Crude Oil Inventories. Estimate 0.4M. Actual 5.3M
• 16:00 US TIC Long-Term Purchases. Estimate 32.9B

Thursday (November 17)

• 8:30 US Building Permits. Estimate 1.19M
• 8:30 US CPI. Estimate 0.4%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
• 8:30 US Unemployment Claims. Estimate 257K
• 10:00 US Fed Chair Janet Yellen Testifies

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, November 16, 2016

XAU/USD November 16 at 11:50 EST

Open: 1226.99 High: 1233.13 Low: 1221.48 Close: 1226.19

XAU/USD Technical

• XAU/USD remains flat in the Wednesday session
• 1223 was tested earlier in support and remains under strong pressure
• There is resistance at 1245
• Current range: 1223 to 1245

Further levels in both directions:

• Below: 1223, 1205 and 1174
• Above: 1245, 1279, 1290 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio has shown gains in long positions. Currently, long positions have a substantial majority (79%), indicative of trader bias towards XAU/USD breaking out 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.