Gold Remains Under Pressure, Touches 4 Month Lows

Gold has shown some downward movement on Monday, but is unchanged on the day. In the North American session, spot gold is trading at $1212.09 per ounce. Earlier in the day, gold prices dropped to a low of $1204, the metal’s lowest level since mid-March. On the release front, there are no major events on the schedule.

Gold had a rough week, dropping 2.4 percent. The metal lost ground on Friday, as Nonfarm Payrolls rebounded in June, climbing to 222 thousand. This easily beat the estimate of 175 thousand and marked a 4-month high. At the same time, employment data was not all positive, as wage growth wage growth was unchanged at 0.2%, shy of the forecast of 0.3%. Weak wage growth has remained soft throughout the first half of 2017, despite a tight labor market. With wages remaining stagnant, inflation is also mired at low levels.

The Fed has consistently said that it plans to raise interest rates for a third and final time in December. Last month, Fed Chair Janet Yellen shrugged off inflation worries, saying that she expected inflation was mired at lows levels due to temporary factors. However, the markets don’t seem to be buying in, as the odds of a December hike have dropped to just 47%, according to the CME Group. The US economy slowed down in the first quarter, and there are signs that Q2 will also be soft. Consumer spending, which comprises two-thirds of US economic growth, remains soft. Another sore point in the economy is inflation, which remains below the Fed’s target of 2%. If the economy doesn’t show signs of stronger growth and higher inflation, the Fed might change its tune about a December rate, which would be good news for slumping gold prices.

XAU/USD Fundamentals

Monday (July 10)

• 10:00 US Labor Market Conditions Index. Actual 1.5
• 15:00 US Consumer Credit. Estimate 12.1B

*All release times are EDT

*Key events are in bold

XAU/USD for Monday, July 10, 2017

XAU/USD July 10 at 12:45 EST

Open: 1212.93 High: 1215.72 Low: 1204.89 Close: 1212.09

XAU/USD Technical

• XAU/USD edged lower in the Asian session. The pair posted losses in the European session but recovered. XAU/USD is showing little movement in North American trade
• 1199 is providing support
• 1232 is the next resistance line
• Current range: 1199 to 1232

Further levels in both directions:

• Below: 1199, 1170 and 1146
• Above: 1232, 1260, 1285 and 1307

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a majority (73%). This is indicative of XAU/USD breaking out and climbing to higher levels. 

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