Gold Moves Higher Despite Strong Employment, Mfg. Data

Gold has rebounded on Thursday, after three straight losing sessions. In the North American session, the spot price for an ounce of gold is $1287.74, up 0.54% on the day. On the release front, unemployment claims fell to 222 thousand, well below the estimate of 240 thousand. Manufacturing data was also strong, as the Philly Fed Manufacturing Index jumped to 27.9, crushing the estimate of 21.9 points. On Friday, the US publishes Existing Home Sales and Fed Chair Janet Yellen speaks at an event in Washington.

The markets are keeping a close eye on who will replace Janet Yellen as head of the powerful Federal Reserve. Yellen is due to finish her 3-year term in February 2018. Yellen is apparently interested in serving a second term, but President Trump is looking at other options. Trump has not been complimentary towards Yellen, although it’s hard to argue that Yellen has not done an admirable job. Yellen has ended quantitative easing, raised interest rates and started to unwind the Fed’s balance sheet. Trump’s shortlist includes Jerome Powell, Kevin Warsh and John Taylor. Trump may lean towards Taylor, an economist who is considered more hawkish on policy than Yellen. Under Taylor, interest rates would likely move substantially higher than the current 1.25%, and a rate hike early in 2018 could strengthen the US dollar.

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

  • 8:30 US Unemployment Claims. Estimate 240K. Actual 222K
  • 8:30 US Philly Fed Manufacturing Index. Estimate 21.9. Actual 27.9
  • 10:00 US CB Leading Index. Estimate +0.1%. Actual -0.2%
  • 10:30 US Natural Gas Storage. Estimate 59B
  • Tentative – US Federal Budget Balance. Estimate -0.9B

Friday (October 20)

  • 10:00 US Existing Home Sales. Estimate 5.30M
  • 19:30 Fed Chair Janet Yellen Speaks

*All release times are GMT

*Key events are in bold

 

XAU/USD for Thursday, October 19, 2017

XAU/USD October 19 at 12:35 EST

Open: 1281.11 High: 1290.18 Low: 1276.73 Close: 1287.74

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1240 1260 1285 1307 1337 1367
  • XAU/USD edged lower in the Asian session but then reversed directions. The pair posted gains in the European session and continues to move upwards in North American trade
  • 1285 has switched to a support role following gains by XAU/USD on Thursday
  • 1307 is the next resistance line
  • Current range: 1285 to 1307

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is showing movement towards long positions. Currently, long positions have a majority (67%), indicative of trader bias towards XAU/USD continuing to move 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.