XAU/USD – Gold Slips as French Election Results Whet Risk Appetite

Gold has lost about 1 percent in the Tuesday session. In North American trade, the spot price of one ounce gold is $1265.01. On the release front, the news was mixed. The CB Consumer Confidence report dropped to 120.3, missing the forecast of 123.7 points. However, there was better news from the housing and manufacturing sectors. New Home Sales rose to 621 thousand, well above the estimate of 590 thousand. As well, the Richmond Manufacturing Index came in at 20 points, above the forecast of 18 points.

Investors cheered the results of the French presidential election on Sunday and have regained an appetite for risk assets, sending stock markets up and gold prices lower. The markets breathed a collective sigh of relief, as opinion polls accurately forecast the outcome. The field of 11 candidates in the first round was pared to just 2 candidates, centrist Emmanuel Macron and far-right Marie Le Pen. Macron garnered 24% of the vote and Le Pen 22%. The runoff vote takes place on May 7 and French voters will have a crystal clear choice as they head back to the polls on Sunday. Macron, who served as a minister under Socialist Francois Hollande, favors deregulation and is a staunch supporter of the European Union. Le Pen, who heads the National Front, has campaigned on a ‘France first’ platform, vowing to curb immigration and take France out of the eurozone. Hollande and Francois Fillon, who ran in the first round, have thrown their support behind Macron and asked voters to reject ‘extremism’. Macron is a heavy favorite to win the second round and become president, with polls giving him a comfortable lead of above 60%.Since opinion polls were accurate ahead of the first round of voting, the markets appear to relying on the current polls as well, meaning that a Macron victory has been priced in. Unless this sentiment drastically changes during the week, the election will be a non-event for the market. At the same time, nothing is a sure thing in politics, as underscored by the Brexit vote and the election of Donald Trump, two events which stunned the markets and triggered strong market movement. Bottom line? Traders should not discount the possibility of more volatility from gold during the week.

French Election: Five Things We Have Learned

President Trump will have to reach out to the Democrats in order to avoid a shutdown of the federal government on Saturday. Congress must pass a spending bill which will fund the government until October, but the bill requires the backing of 60 senators. This means that the Republicans (who control 52 seats) will need the support of 8 Democrats. This has led to bipartisan negotiations, and it’s reasonable to expect that these talks could go down to the wire, as both sides try to stick to their positions and try not to blink first. The last shutdown was in 2013, lasting 17 days. Another shutdown would be embarrassing for Trump, as it would start on his 100th day in office and would cast doubts on his ability to push his budget and tax plan through Congress.

US Consumer Confidence Falls in April More than Expected

XAU/USD Fundamentals

Tuesday (April 25)

• 9:00 US HPI. Estimate 0.1%. Actual 0.8%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%. Actual 5.9%
• 9:59 US Richmond Manufacturing Index. Estimate 18. Actual 20
• 10:00 US CB Consumer Confidence. Estimate 123.7. Actual 120.3
• 10:00 US New Home Sales. Estimate 590K. Actual 621K

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, April 25, 2017

XAU/USD April 25 at 13:40 EST

Open: 1277.46 High: 1277.91 Low: 1261.53 Close: 1265.01

XAU/USD Technical

• XAU/USD edged lower in the Asian andEuropean sessions. The pair has showed little movement in the North American session
• 1260 has weakened in support. It could be tested during the North American session
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1232 and 1199
• Above: 1285, 1307, 1337 and 1367

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged this week. Currently, long positions with a majority (58%). This is indicative of trader bias towards XAU/USD reversing directions and moving to higher levels. 

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