XAU/USD – Gold Starts Week With Gains, Fed Meeting Looms

Gold prices have shown modest gains in the Monday session. In North American trade, the spot price for an ounce of gold is $1164.72 an ounce. It’s a very quiet start to the week, with two minor releases on the schedule.

Gold has recorded five consecutive losing weeks and is currently trading at its lowest level since early February. The downward trend could continue, with the Fed likely to raise rates on Wednesday. Gold moves inversely with interest rate movement, as higher rates makes the US dollar more attractive to investors. Traders should be prepared for possible volatility from the metal as we approach the Fed rate decision.

All eyes will be on the Federal Reserve this week, as the Fed meets for its monthly policy meeting on Wednesday. This will be the first meeting after Donald Trump’s election as president. More importantly of course, the markets have priced in a rate hike at 95 percent, most likely a quarter-point increase. This would mark the first hike by the Fed since last December, and anticipation of a hike has translated into strong gains for the greenback. With Trump taking the reins in government in January, it will be interesting to see what happens early next year. Trump has stated that he plans to increase government spending and cut taxes, which could lead to higher inflation levels. The Fed has indicated that it plans to raise rates gradually in 2017, but this could change once the new administration’s economic policies become clearer.

XAU/USD Fundamentals

Monday (December 12)

  • 13:01 US 10-year Bond Auction
  • 14:00 US Federal Budget Balance. Estimate -99.5B

*All release times are EST

*Key events are in bold

XAU/USD for Monday, December 12, 2016

XAU/USD December 12 at 13:30 EST

Open: 1158.44 High: 1165.30 Low: 1151.00 Close: 1164.72

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1111 1130 1146 1174 1205 1223
  • XAU/USD showed little movement in the Asian and European sessions. The pair has posted gains in North American trade
  • 1146 is providing support
  • 1174 is the next resistance line
  • Current range: 1146 to 1174

Further levels in both directions:

  • Below: 1146, 1130 and 1111
  • Above: 1176, 1205, 1223 and 1245

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a substantial majority (78%). This is indicative of trader bias towards XAU/USD continuing to move to higher levels.

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.