Gold Dips to $1300 as Greenback Improves, Markets Eye Yellen Speech

Gold has posted losses in on Tuesday, erasing most of the gains which marked the Monday session. In North American trade, the spot price for an ounce of gold is $1300.15, down 0.79% on the day. Gold prices faltered despite lukewarm US numbers on Tuesday, as the US dollar moved higher against the euro, yen and the British pound. CB Consumer Confidence dipped to 119.8, shy of the estimate of 119.9 points. On the housing front, New Home Sales slowed to 560 thousand, well short of the forecast of 585 thousand. Later in the day, Fed Chair Janet Yellen will speak at an event in Cleveland. On Wednesday, the US will release Core Durable Goods Orders and Pending Home Sales.

What does the Federal Reserve have planned regarding interest rates? That question could weigh on the markets for weeks, as analysts are having a tough time pinning down whether the Federal Reserve plans to raise rates on final time in 2017. With policymakers sending out mixed messages, the markets really don’t know what to expect, and fed futures have priced in a December hike at 55%. On Monday, New York Fed President William Dudley made a strong case to raise rates. Dudley cited a soft US dollar and strong global growth as reasons why inflation would increase and also translate into stronger wage growth. Dudley said he expects inflation to reach the Fed’s target of 2 percent in the “medium term”, and predicted that the Fed would continue to gradually remove monetary accommodation. However, Chicago Fed President Charles Evans sent out a very different message, calling on the Fed to avoid another rate hike until wage and inflation levels moved higher. Evans said that inflation, which is running at around 1.4%, is too low, and wants to see “clear signs” that prices are moving higher before the Fed presses the rate trigger.

As expected, the Fed stayed on the sidelines at last week’s policy meeting and maintained the benchmark rate at 1.25%. There was dramatic news, however, as the Fed announced that it would reduce its $4.2 trillion balance sheet by $50 billion/mth, starting in October. Commenting on the decision to taper the balance sheet, FOMC member John Williams said on Friday that he did not “anticipate any sudden or large effects on rates or spreads”, but acknowledged that the Fed could not predict how the markets would react, and policymakers would have to monitor market reaction to the reduction in the balance sheet.

XAU/USD Fundamentals

Tuesday (September 26)

• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%. Actual 5.8%
• 9:59 US Richmond Manufacturing Index. Estimate 13. Actual 19
• 10:00 US CB Consumer Confidence. Estimate 119.9. Actual 119.8
• 10:00 US New Home Sales. Estimate 585K. Actual 560K
• 10:30 US FOMC Member Lael Brainard Speaks
• 12:45 Federal Reserve Chair Janet Yellen Speaks

Wednesday (September 27)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 10:00 US Pending Home Sales. Estimate -0.5%

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, September 26, 2017

XAU/USD September 26 at 12:30 EST

Open: 1310.51 High: 1313.81 Low: 1298.59 Close: 1300.15

XAU/USD Technical

• XAU/USD edged higher in the Asian session. The pair lost ground in the European session and has posted small gains in North American trade
• 1285 is providing support
• 1307 has switched to a resistance role following losses by XAU/USD on Tuesday
• Current range: 1285 to 1307

Further levels in both directions:

• Below: 1285, 1260 and 1240
• Above: 1307, 1337, 1367 and 1392

OANDA’s Open Positions Ratio

XAU/USD is unchanged this week. Currently, long positions have a majority (54%), indicative of trader bias towards XAU/USD reversing directions and moving to higher ground. 

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