Gold Dips to 1-Week Low Despite Soft US Housing Data

Gold is down for a third consecutive day. In the North American session, the spot price for an ounce of gold is $1279.79, down 0.39% on the day. On the release front, the focus was on housing data, and the September numbers were soft. Building Permits slowed to 1.22 million, shy of the estimate of 1.25 million. Housing Starts dropped to 1.13 million, missing the forecast of 1.18 million. On Thursday, the US will publish unemployment claims and the Philly Fed Manufacturing Index.

It’s been a rough week for gold, which has dropped 1.8 percent. The metal has been under pressure following reports that President Trump is leaning towards nominating economist John Taylor as the new head of the Federal Reserve, after Fed Chair Janet Yellen’s term ends in February 2018. Taylor is considered more hawkish on policy than the current head, Janet Yellen, and Taylor’s monetary stance would see interest rates substantially higher than the current 1.25%. A more hawkish Fed under Taylor could be inclined to raise interest rates early in 2018, despite weak inflation, which would strengthen the greenback against gold. Other candidates for the Fed Chair include current Fed Governor Jerome Powell and former Fed official Kevin Warsh.

The Federal Reserve is on track for a third and final rate hike in 2017. Fed Chair Janet Yellen has sounded positive about the economy and says that she expects inflation to move higher. The markets have picked up on this message, and the odds of a December hike have jumped to a sizzling 91 percent. Just one month ago, the odds were 50-50 that the Fed would raise rates at the December meeting. Low inflation levels have been a key reason that the Fed has been reluctant to raise rates, but policymakers insist that inflation will move closer towards the Fed’s inflation target of 2 percent.

XAU/USD Fundamentals

Wednesday (October 18)

  • 8:00 US FOMC Member William Dudley Speaks
  • 8:00 US FOMC Robert Kaplan Speaks
  • 8:30 US Building Permits. Estimate 1.25M. Actual 1.22M
  • 8:30 US Housing Starts. Estimate 1.18M. Actual 1.13M
  • 10:30 US Crude Oil Inventories. Estimate -4.7M. Actual -5.7M
  • 14:00 US Beige Book
  • Tentative – Federal Budget Balance. Estimate -0.9B

Thursday (October 19)

  • 8:30 US Unemployment Claims. Estimate 240K
  • 8:30 US Philly Fed Manufacturing Index. Estimate 21.9

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, October 18, 2017

XAU/USD October 18 at 11:35 EST

Open: 1285.02 High: 1288.80 Low: 1276.88 Close: 1279.79

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1213 1240 1260 1285 1307 1337
  • XAU/USD edged higher in the Asian session but reversed directions and lost ground in the European session. The pair is showing little movement 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 ratio is almost unchanged in the Wednesday session. Currently, long positions have a majority (63%), indicative of trader bias towards XAU/USD reversing its current slide and moving to higher ground.

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.