Gold Dips as US Posts Strong Inflation, Manufacturing Reports

Gold has reversed directions in the Thursday session and posted losses. In the North American session, spot gold is trading at $1251.18 per ounce. On the release front, US numbers were solid, as unemployment claims dropped to 232 thousand, lower than the forecast of 240 thousand. As well, the Philly Fed Manufacturing Index soared to 38.8, crushing the forecast of 19.9 points. In Washington, Treasury Secretary Steven Mnuchin testifies before the Senate Banking Committee on the rollback of the Dodd-Frank finance regulations.

Gold has gained 1.5% this week, as the safe-haven commodity has benefited from the political chaos which has gripped Washington. The beleaguered Trump administration appears to be rudderless as it staggers from crisis to crisis. The latest development is that the Justice Department has agreed to appoint a former FBI director as special counsel to investigate possible Russian involvement in the US presidential election as well as any connection between Trump and the Russians during the election campaign. On Tuesday, reports surfaced that Trump had asked former FBI director James Comey to close an investigation into ties between Russia and Trump’s former security adviser, Michael Flynn, leading some lawmakers to question whether Trump had committed obstruction of justice. As if this wasn’t enough for Trump’s aides to deal with, the president is under fire for passing classified intelligence to the Russian foreign minister. Trump initially denied the claim, but has since admitted that he did share intelligence with the Russians, arguing that he had acted within his rights. With the Trump administration frantically trying to douse political fires, investors are concerned that Trump will have more difficulty passing into law his plans for increased stimulus and tax reform. If the crisis mode in Washington continues, we could see gold make further gains against the dollar.

Economists Don’t See Trump Political Turmoil Derailing June Rate Hike

 

XAU/USD Fundamentals

Thursday (May 18)

  • 8:30 US Unemployment Claims. Estimate 240K. Actual 232K
  • 8:30 US Philly Fed Manufacturing Index. Estimate 19.9. Actual 38.8 
  • 10:00 US CB Leading Index. Estimate 0.4%. Actual 0.3%
  • 10:00 US Treasury Secretary Steven Mnuchin Speaks
  • 10:30 US Natural Gas Storage. Estimate 61B. Actual 68B

*All release times are EDT

*Key events are in bold

 

XAU/USD for Thursday, May 18, 2017

XAU/USD May 18 at 13:50 EST

Open: 1260.98 High: 1265.01 Low: 1249.43 Close: 1251.18

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1175 1199 1232 1260 1285 1307
  • XAU/USD showed little movement in the Asian session. The pair posted slight gains in the European session and this trend has continued in North American trade
  • 1232 is providing support
  • 1260 remains a weak resistance line
  • Current range: 1232 to 1260

Further levels in both directions:

  • Below: 1232, 1199, 1175 and 1146
  • Above: 1260, 1285 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio has shown slight movement towards short positions. Currently, long positions have a strong majority (67%), indicative of trader bias towards XAU/USD reversing directions and moving upwards. 

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.