XAU/USD – Gold Improves to 11-Week Highs as US Dollar Softens

Gold has posted moderate gains in the Thursday session. In North American trade, the spot price for one ounce is trading at $1217.34. On the release front, Unemployment Claims dropped to 241 thousand, beating the forecast of 251 thousand. US employment data will be in focus on Friday, as the US releases Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate.

Donald Trump continues to be as controversial as ever, and has picked fights with Mexico and Australia this week, just two weeks after becoming president. The stock markets may be uneasy about Trump’s rhetoric and moves, but the uncertainty has been good for gold, which has jumped 1.9% this week. The base metal climbed to $1225 on Thursday, its highest level since November 17. Gold has taken advantage of a softer dollar, which is broadly lower in the Thursday session. Will the gold rally continue?

On Wednesday, the Federal Reserve opted to stay the course, leaving the benchmark interest rate at 0.50%. The Fed’s rate statement was upbeat about the economy and said that inflation continues to move towards the Fed’s target of 2 percent. Analysts expect the Fed to raise rates two or three times in 2017, with the odds of a rate hike by June priced in 70%. However, Donald Trump remains an enigma, as his economic policy remains unclear – Trump has promised substantial fiscal spending and tax cuts, but hasn’t provided any details. Just a few months ago, a red-hot economy had led to the Fed loudly hinting at gradual rate increases in 2017. However, with the markets showing increasing uneasiness about the new Trump administration, the Fed will likely change gears and adopt a wait-and-see attitude, watching what bills Trump gets through Congress and how the economy responds.

Trump On, Trump Off, Fed an Onlooker

XAU/USD Fundamentals

Thursday (February 2)

  • 7:30 US Challenger Job Cuts. Actual -38.8%
  • 8:30 US Unemployment Claims. Estimate 251K. Actual 246K
  • 8:30 US Preliminary Nonfarm Productivity. Estimate 1.0%. Actual 1.3%
  • 8:30 US Preliminary Unit Labor Costs. Estimate 2.3%. Actual 1.7%
  • 10:30 US Natural Gas Storage. Estimate -82B

Upcoming Key Releases

Friday (February 3)

  • 8:30 US Average Hourly Earnings. Estimate 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 170K
  • 8:30 US Unemployment Rate. Estimate 4.7%
  • 10:00 US ISM Nonfarm Manufacturing PMI. Estimate 57.0

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, February 2, 2017

XAU/USD February 2 at 11:50 EST

Open: 1209.63 High: 1225.34 Low: 1209.51 Close: 1217.34

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1146 1175 1199 1232 1260 1285
  • XAU/USD was flat in the Asian session. The pair posted slight gains in European trade but has retracted in North American session
  • 1199 is providing 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

XAU/USD ratio is showing limited movement in the Wednesday session. Long positions have a strong majority (68%), indicative of trader bias towards XAU/USD continuing to climb 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.