Gold Under Pressure Over Fed Chair Uncertainty

Gold has lost ground in the Tuesday session. In the North American session, the spot price for an ounce of gold is $1275.72, down 0.48% on the day. On the release front, Richmond Manufacturing Index slowed to 12 points, well off the forecast of 19 points. This marked its weakest gain since June. In the US, there are two key events – Core Durable Goods Orders and New Home Sales.

Gold prices have steadied this week, after the metal slipped 1.9 percent last week. Investor risk appetite increased as the US posted strong numbers last week, as employment, manufacturing and housing data beat their estimates. As well, the growing possibility that John Taylor could become the next head of the Federal Chair has hurt gold, as Taylor is considered a strong proponent of higher interest rate levels.

Who will take over at the Federal Reserve? The markets are keeping close tabs on the central bank, as Janet Yellen’s 3-year term expires in February. President Trump has said he will nominate a new Fed head in the coming days, and the front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen’s monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump’s choice for the new Fed chair could have an effect on monetary policy and the strength of the US dollar. Still, most economists are of the view that monetary policy will be largely driven by the performance of the US economy. Inflation levels remain weak and may not reach Fed’s target of 2 percent before 2020, but that has not dampened expectations of a December rate hike. According to CME FedWatch, the odds of a raise in December stand at 96 percent.

 

XAU/USD Fundamentals

Tuesday (October 24)

  • 9:45 US Flash Manufacturing PMI. Estimate 53.3. Actual 54.5
  • 9:45 US Flash Services PMI.  Estimate 55.2. Actual 55.9
  • 10:00 US Richmond Manufacturing Index. Estimate 17. Actual 12

Wednesday (October 25)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 10:00 US New Home Sales. Estimate 556K

*All release times are GMT

*Key events are in bold

 

XAU/USD for Tuesday, October 24, 2017

XAU/USD October 24 at 12:20 EST

Open: 1282.03 High: 1283.77 Low: 1273.70 Close: 1275.76

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1213 1240 1260 1285 1307 1337
  • XAU/USD was flat in the Asian sessions. The pair edged lower in European trade and continues to lose ground 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 showing limited movement this week. Currently, long positions have a majority (66%), indicative of trader bias towards XAU/USD reversing directions 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.