XAU/USD – Gold Steady at $1200, Markets Eye May Speech on Brexit

Gold prices are steady in Monday’s North American session, as the metal trades just above the $1200 level. The markets in the US  are closed in observance of Martin Luther King Day, and thin liquidity means that traders can expect limited market movement. There are no US releases on the schedule. On Tuesday, Prime Minister Theresa May will deliver a speech in London, in which she is expected to discuss Brexit.

On Monday, there were media reports that Prime Minister May was prepared for a “hard” exit from the European Union. Under such an arrangement, Britain will relinquish access to the EU’s single market but will maintain control over its immigration policy. Predictably, the news sent the British pound below the 1.20 level for the first time since the “flash crash” in October. Markets on both sides of the pond will be monitoring Prime Minister May’s speech on Tuesday, in which she will likely address the Brexit issue. May’s speech could lead to volatility in gold prices – if May projects toughness and hints at a “hard” Brexit, investors could react negatively, sending the pound lower and gold prices higher.

Early in the New Year, the US consumer remains bullish about the economy. The UoM Consumer Sentiment in January was solid, but the markets had expected a stronger performance. The indicator was almost unchanged at 98.1, shy of the forecast of 98.6. Despite the optimism, US retail sales were a mix during the December holiday season. Retail Sales improved to 0.6%, edging above the estimate of 0.5%. However, much of the increase in spending was attributable to automobile sales, at the expense of other sectors of the economy. This was reflected in Core Retail Sales (which excludes car sales), which remained stuck at 0.2%, compared to a forecast of 0.5%. Still, analysts are confident that an optimistic consumer will translate into strong spending numbers in the next few months. There was good news on the inflation front, as wholesale prices (measured by PPI) rose 0.3%, beating the forecast of 0.1%. This marked the third rise in four months, as inflation is pointing upwards due to higher oil prices. If inflation continues to climb towards the Federal Reserve target of 2.0%, we could see the Fed step in and raise interest rates. On Thursday, FOMC member Patrick Harker took note of the strong US economy and projected three “modest” rates from the Fed in 2017.  We’ll get another look at key inflation numbers on Wednesday, with the release of CPI and Core CPI.

Fed’s Harker Sees 3 Rate Hikes in 2017

Monday (January 16)

  • There are no US events scheduled on Monday

XAU/USD for Monday, January 16, 2017

XAU/USD January 16 at 13:05 EST

Open: 1203.45 High: 1208.72 Low: 1200.21 Close: 1202.76

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1146 1174 1199 1232 1260 1285
  • XAU/USD posted slight gains in the Asian and European sessions. The pair is steady in North American trade
  • 1199 is fluid. Currently, its is providing weak support
  • 1232 is the next resistance line
  • Current range: 1199 to 1232

Further levels in both directions:

  • Below: 1199, 1174, 1146 and 1130
  • Above: 1232, 1260 and 1285

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a strong majority (72%), indicative of trader bias towards XAU/USD breaking out and climbing 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.