XAU/USD – Gold Hits 3-Month Highs as Markets Uneasy over Trump, Le Pen

Gold has resumed its rally, posting considerable gains in the Wednesday session. In North American trade, the spot price for one ounce is $1241.24, as XAU/USD trades at 3-months. In economic news, there were no major events on the schedule. Crude Oil Inventories posted a sharp surplus of 13.8 million barrels, crushing the estimate of 2.7 million. On Thursday, the US releases the weekly unemployment claims report, which is expected to rise to 249 thousand.

There is continuing market concern over developments in Europe, as populist, far-right parties are gaining in support, threatening the old order. France goes to the polls in April, and Marie Le Pen, the far-right candidate in the ring, is leading in the polls ahead of the first round of voting. Le Pen is not only a strong supporter of Donald Trump, but is hoping to pull off a Trump-style upset win. Le Pen wants to take France out of the Eurozone and has promised a referendum on France’s membership out of the European Union.

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.

XAU/USD Fundamentals

Wednesday (February 8)

• 10:30 US Crude Oil Inventories. Estimate 2.7M. Actual 13.8M
• 13:01 US 10-y Bond Auction

Thursday (February 9)

• 8:30 US Unemployment Claims. Estimate 249K

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, February 8, 2017

XAU/USD February 8 at 13:00 EST

Open: 1231.99 High: 1244.76 Low: 1229.76 Close: 1241.24

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair has posted gains in the European and North American sessions
• 1232 is providing 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 Wednesday 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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