XAU/USD – Gold Slightly Lower Ahead of Fed Rate Statement

Gold has posted slight losses in the Tuesday session. In North American trade, spot gold is trading at $1250.26, down 0.39% on the day. On the release front, CB Consumer Confidence jumped to 121.1, above the estimate of 116.5 points. There was positive news from the manufacturing sector, as the Richmond Manufacturing Index jumped to 14 points, well above the forecast of 7 points. On Wednesday, the Federal Reserve releases its monthly rate statement, and we’ll also get a look at New Home Sales.

Gold continues to trade at high levels, as political turmoil in Washington has led to investors snapping up gold, a traditional safe-haven asset. On Monday, the metal touched a high of $1258.83, its highest level since June 15. Investors are increasingly concerned over Donald Trump, whose brash behavior and unconventional style has not been a good fit for the highest office in the land. Trump has failed to pass his healthcare bill, although the president is pulling out all the stops, as the Senate is expected to hold a procedural vote concerning the healthcare bill later on Tuesday. It’s been a rough ride so far for Trump, who has failed to pass any significant legislation, and investors are becoming more skeptical as to whether Trump will have any more success with his tax reform and fiscal spending plans. With the Democrats forming a rock-solid wall of opposition, dissension among Republican lawmakers, many of whom are uneasy about Trump, could doom attempts by the White House to get any major bills passed by Congress.

The Federal Reserve is in the spotlight, as it holds its monthly policy meeting on Tuesday and Wednesday, With the odds of a rate hike at just 3%, the markets will be focused on the Fed’s rate statement, which will be released on Wednesday. US numbers in the second quarter have been mixed, and inflation remains well below the Fed target of 2%. Given these economic conditions, investors are unsure if the Fed will raise rates in December, with the odds currently at 47%, according to the CME Group. Analysts will be looking for nuances in the language of the statement, and a dovish tilt from the Fed could hurt the dollar and boost the red-hot euro. Another issue for Fed policymakers is the $4.2 trillion bond portfolio, a result of the aggressive quantitative easing program which was put in place after the financial crisis in 2008. In June, the Fed outlined plans to reduce its bloated balance sheet, with experts circling September as the start date of the reduction. With gold prices closely linked to monetary policy, any clues in the rate statement regarding a rate hike or the start of winding up the balance sheet could have a significant effect on gold prices.

USD/XAU Fundamentals

Tuesday (July 25)

  • 9:00 US HPI. Estimate 0.5%. Actual 0.4%
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.8%. Actual 5.7%
  • 9:59 US Richmond Manufacturing Index. Estimate 7. Actual 14
  • 10:00 US CB Consumer Confidence. Estimate 116.5. Actual 121.1
  • 13:00 MPC Member Andy Haldane Speaks

Wednesday (July 26)

  • 10:00 US New Home Sales. Estimate 615K
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.25%

*All release times are EDT

*Key events are in bold

XAU/USD for Tuesday, July 25, 2017

XAU/USD July 25 at 12:30 EST

Open: 1255.17 High: 1257.84 Low: 1249.18 Close: 1251.32

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1170 1199 1232 1260 1285 1307
  • XAU/USD ticked higher in the Asian session. The pair posted slight losses in the European session and is choppy 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, 1170 and 1146
  • Above: 1260, 1285 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight gains in short positions. Currently, long positions have a majority (65%), indicative of XAU/USD reversing directions and moving higher.

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.