Gold Rally Continues on Geopolitical Jitters

Gold continues to move higher and has posted gains in the Wednesday session. In North American trade, spot gold is trading at $1274.75, up 0.60% on the day. On the release front, inflation indicators disappointed, as PPI and Core PPI both declined 0.1%, missing their estimates of +0.1%. Unemployment claims rose to 244 thousand, higher than the estimate of 240 thousand. Inflation numbers will again be in focus on Friday, as the US releases CPI and Core CPI.

Gold prices have risen in recent weeks, as global markets are jittery over rising tensions between North Korea and the US. With the war of words escalating between the two countries, global markets are down, as investors have dumped shares in favor of safe-haven assets, such as gold. North Korea has vowed to retaliate over new sanctions imposed by Washington and has threatened to attack Guam, which is a major US military base. President Trump and North Korean President Kim Jong-un are on a possible collision course, which has caused alarm in South Korea and Japan, strong allies of the US.

What can we expect from the Fed in the second half of 2017? The markets are looking for some clarity from the Federal Reserve, which is showing signs of backtracking on another rate hike in 2017. Earlier this year, the Fed strongly hinted that it planned to raise rates three times in this year, but so far only pressed the rate trigger twice, in March and June. After the June hike, Fed Chair Janet Yellen shrugged off concerns over low inflation, saying that it was due to “transient” factors. However, inflation has not improved and the Fed has changed its tune. Last week, St. Louis Federal Reserve President James Bullard said he opposed further Fed hikes, warning that another hike would actually delay inflation from hitting the Fed’s target of 2%. The Fed appears uncertain about when to raise rates, and predictably, this hesitancy is making investors skeptical that the Fed will act. There is little chance that the Fed will make any moves at the September and November meetings, and the odds of a rate hike in December are currently at 42%. Analysts are hoping for some insight into the Fed’s thinking when the Fed Reserve Dallas President Robert Kaplan and Minneapolis President Neel Kashkari deliver speeches on Friday. The markets will also be keeping a close eye on CPI, the primary gauge of consumer inflation. Weak numbers could hurt the greenback and lower the odds of a December hike.

XAU/USD Fundamentals

Thursday (August 10)

• 8:30 US PPI. Estimate +0.1%. Actual -0.1%
• 8:30 US Unemployment Claims. Estimate 240K. Actual 244K
• 8:30 US Core PPI. Estimate +0.2%. Actual -0.1%
• 10:00 US FOMC Member William Dudley Speaks
• 10:30 US Natural Gas Storage. Estimate 38B. Actual 28B
• 13:01 US 30-y Bond Auction
• 14:00 US Federal Budget Balance. Estimate -60.9B

Friday (August 11)

• 8:30 US CPI. Estimate 0.2%
• 8:30 US Core CPI. Estimate 0.2%
• 9:40 US FOMC Member Robert Kaplan Speaks
• 11:30 US FOMC Member Neel Kashkari Speaks

*All release times are EDT

*Key events are in bold

XAU/USD for Thursday, August 10, 2017

XAU/USD August 10 at 12:35 EST

Open: 1277.38 High: 1287.92 Low: 1274.75 Close: 1284.07

XAU/USD Technical

• XAU/USD edged higher in the Asian and European sessions. The pair has posted considerable losses in North American trade
• 1232 is providing support
• 1260 is under pressure in resistance
• Current range: 1232 to 1260

Further levels in both directions:

• Below: 1232, 1199 and 1170
• Above: 1260, 1285, 1307 and 1337

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight movement towards short positions. Currently, long positions have a majority (53%), indicative of XAU/USD reversing directions and moving higher.

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