Gold Rally Continues as Trump Stumbles

Gold has posted gains for a third straight day, as the pair is up 0.67% in the Tuesday session. In the North American session, spot gold is trading at $1242.50 per ounce. In economic news, there are no major US events on the schedule. On Wednesday, the US releases Building Permits and Housing Starts.

Gold is on a roll, having gained 2.1% since Friday. The metal moved higher after CPI and retail sales disappointed, and the rally has continued this week. Gold prices have climbed on Tuesday after President Trump suffered a major setback, as his health care bill has stalled in the Senate, even before being brought to the floor for a vote. After two key Republicans announced they would not support the bill, the Republican leadership said it will not attempt to advance a health care proposal before Congress takes a recess in August. This decision is a blow for Trump, who had made a new health care act a key part of his agenda. With this latest defeat, there is growing skepticism as to whether Trump will be able to convince Congress to pass other key parts of his agenda – tax reform and fiscal spending. The Republicans also have egg on their faces, as they have been unable to pass any significant legislation since Trump took over, despite having control of both houses of Congress and the White House.

The US economy remains in good shape, and the labor market is close to capacity, with unemployment at just 4.3 percent. Still, inflation levels remain low. The Federal Reserve has tried to convince the markets that it’s only a matter of time before inflation levels move higher. This stance was reiterated by Fed Chair Janet Yellen last week, as she testified before congressional and senate committees. In her testimony, Yellen admitted that the Fed was at a loss to explain the lack of inflation, but insisted that it was “premature to conclude that the underlying inflation trend is falling well short of 2 percent”, and that with a strong labor market “the conditions are in place for inflation to move up”. Despite the Fed’s assurances, the markets aren’t buying in, with a rate hike considered extremely unlikely in September. As for a December increase, the odds are currently at just 47%, according to the CME Group. Consumer spending and inflation numbers were soft in June, and the disappointing numbers will do little to improve market skepticism about one last rate hike this year.

XAU/USD Fundamentals

Tuesday (July 18)

• 8:30 US Import Prices. Estimate -0.2%. Actual -0.2%
• 10:00 US NAHB Housing Market Index. Estimate 67. Actual 64
• 16:00 US TIC Long-Term Purchases. Estimate 20.3B

Wednesday (July 19)

• 8:30 US Building Permits. Estimate 1.20M
• 8:30 US Housing Starts. Estimate 1.16M

*All release times are EDT

*Key events are in bold

XAU/USD for Tuesday, July 18, 2017

XAU/USD July 18 at 12:25 EST

Open: 1234.04 High: 1244.41 Low: 1230.85 Close: 1242.50

XAU/USD Technical

• XAU/USD edged higher in the Asian session. The pair posted small gains in the European session and continues to gain ground in North American trade
• 1232 is providing support
• 1260 is the next resistance line
• Current range: 1232 to 1260

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Tuesday session. Currently, long positions have a majority (77%). This is indicative of XAU/USD continuing to climb higher.

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