XAU/USD – Gold Pauses After Gains, Jobs Report Falls Short

Gold is almost unchanged in the Tuesday session, following strong gains on Monday. In North American trade, the spot price for one ounce is $1234.49, close to 3-month highs. In economic news, the trade deficit narrowed to $44.3 billion, beating the forecast of $45.0 billion. On the employment front, JOLTS Jobs Openings edged lower to 5.52 million, shy of the estimate of 5.56 million.

President Donald Trump continues to create controversies on a daily basis, and his brash and undiplomatic style has not endeared him to the markets. Moreover, the lack of an economic policy from the new administration is a major source of concern and the the post-election euphoria which sent the markets higher has dissipated. The Federal Reserve, which had trumpeted that it was planning a series of hikes in 2017 (sound familiar?), was more cautious in its recent rate statement and is expected to adopt a wait-and-see attitude in the coming months. If the economy continues to grow, there is a strong likelihood of another rate hike in the first half of 2017, which is bullish for the dollar. On the other hand, if Trump makes good on his promises to “make America first” and implement protectionist policies, the greenback could lose ground, which would be bullish for gold prices.

America First! Trump’s protectionist stance just a few weeks into his term is setting off alarm bells with close trading partners of the US, including Canada, Mexico and Japan. Trump has declared that he intends to revisit the NAFTA trade agreement, which has been an anchor of the US-Canada trade relationship for over 20 years. Trump didn’t mince words last week when describing NAFTA, saying that “NAFTA has been a catastrophe for our country. It’s been a catastrophe for our workers and our jobs and our companies.” Although Trump is unlikely to unravel the agreement, his protectionist stance could lead to tensions or even a trade war with the United States’ neighbors. Last week, Trump took aim at Japan, stating that Japanese monetary policy was dragging down the value of the yen and creating an unfair trade advantage for Japan. The harsh rhetoric has increased nervousness in the markets and could lead to stronger gold prices if investors are attracted to gold, a traditional safe-haven.

XAU/USD Fundamentals

Tuesday (February 7)

• 8:30 US Trade Balance. Estimate -45.0B. Actual -44.3B
• 10:00 US JOLTS Job Openings. Estimate 5.56M. Actual 5.50M
• 10:00 US IBD/TIPP Economic Optimism. Estimate 56.2. Actual 56.4
• 15:00 US Consumer Credit. Estimate 20.3B

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, February 7, 2017

XAU/USD February 7 at 13:50 EST

Open: 1233.30 High: 1235.60 Low: 1227.65 Close: 1234.49

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair posted small losses in the European session but recovered in North American session
• 1232 is providing weak support
• 1260 is the next resistance line
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199, 1174 and 1146
• Above: 1260, 1285 and 1307

OANDA’s Open

Positions Ratio

XAU/USD ratio is unchanged in the Tuesday session. Currently long positions with a strong majority (66%), indicative of trader bias towards XAU/USD continuing to climb to higher levels.

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