Gold Posts Small Gains, Markets Eye ADP Employment Report

Gold has posted slight gains in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1274.56, up 0.27% on the day. There are no major US events on the schedule. On Wednesday, the US releases two key events – the ADP Nonfarm Payrolls and the ISM Nonfarm Manufacturing report. As well, Federal Reserve Chair Janet Yellen will speak at an event in hosted by the St. Louis Fed.

After failing to pass a new health care act through a skeptical Congress, Donald Trump has now set his sights on tax reform, another key campaign pledge from Trump’s election campaign. Last week, the White House announced the new tax proposal, called the Unified Tax Reform Framework, which includes lowering corporate and personal income taxes. However, the plan is sketchy and short on specifics, most importantly, how will the plan be paid for? Trump has insisted that the cuts will trigger strong economic growth which will more than pay for itself. However, Moody’s, the well-respected credit rating company, is not impressed by the rhetoric. On Monday, Moody’s said that the tax plan is “likely credit negative”, arguing that tax cuts would not be offset in spending cuts, which would result in a higher federal budget deficit and debt. The reduction in federal government revenue would negatively affect the US credit rating. Some Republican lawmakers have already come out against the plan, so it appears that the proposal will have an uphill battle to pass through the House of Representatives and the Senate.

US manufacturing indicators have been pointing upwards, as a stronger global economy has led to increased demand for US goods. The positive trend continued on Monday, as ISM Manufacturing PMI,  the primary gauge of manufacturing activity, accelerated in September to 60.8 points. This reading indicated strong expansion, and was the indicator’s highest level since April 2011. Gold prices reacted to the strong reading with losses. Gold has been in retreat, as prices declined 3.2 percent in September. With the North Korean conflict again on the back burner and the US continuing to post strong numbers, investors have a renewed appetite for riskier assets, which has weighed on safe-haven gold. On Wednesday, the US releases key employment and services data, and if these releases beat expectations, gold prices could drop lower.

XAU/USD Fundamentals

Tuesday (October 3)

• 8:30 US FOMC Member Jerome Powell Speaks
• All Day – US Total Vehicle Sales. Estimate 16.9M

Wednesday (October 4)

• 8:15 US ADP Nonfarm Employment Change. Estimate 151K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.5
• 15:15 US Federal Chair Janet Yellen Speaks

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, October 3, 2017

XAU/USD October 3 at 12:15 EST

Open: 1271.08 High: 1274.78 Low: 1268.42 Close: 1274.56

XAU/USD Technical

• XAU/USD showed little movement in the Asian and European sessions. The pair has showed slight gains in North American trade
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1240 and 1213
• Above: 1285, 1307, 1337 and 1367

OANDA’s Open Positions Ratio

XAU/USD is unchanged in the Tuesday session. Currently, short positions with a majority (62%), indicative of trader bias towards XAU/USD reversing directions and moving lower.

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