Gold Higher Ahead of Fed Rate Statement

Gold has posted gains in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1277.20, up 0.47% on the day. On the release front, ADP Nonfarm Payrolls surged to 235 thousand, crushing the estimate of 202 thousand. On the manufacturing front, ISM Manufacturing PMI slowed to 58.7, missing the forecast of 59.5 points. Today’s highlight is the FOMC rate statement, with no change expected in the benchmark interest rate. On Thursday, and the US will publish unemployment claims.

Will the Federal Reserve rate statement move gold prices? The Fed is widely expected to maintain the benchmark rate at 1.25%, but the statement could provide clues about future rate policy. The markets have priced in a December rate at 98.5%, which would mark a third rate for 2017. What can we expect in 2018? That depends to a large degree on the new chair of the Fed. Janet Yellen will wind up her 3-year term in February, and she is not expected to be reappointed by President Trump. The front runner is economist Jerome Powell, who is expected to maintain the current policy of tightening through incremental hikes. Trump is expected to make his choice on Thursday, ahead of his trip to Asia.

The US consumer remains optimistic about the economy, and that confidence has translated into stronger spending. CB Consumer Confidence jumped to 125.9 points, and last week’s UoM Consumer Sentiment climbed to an all-time high of 100.7 points. Personal spending gained 1.0% in September, its sharpest gain since April 2016. The strong reading comes on the heels of Friday’s UoM Consumer Sentiment Report, which hit an all-time record in September. Consumer spending is a key driver of the economy, accounting for two-thirds of economic growth.

The Bank of England is expected to raise rates for the first time in a decade on Thursday. Bank policymakers are in a quandary with regard to rate policy. Inflation is running well above the Bank’s target of 2 percent, which has eroded consumer spending. As well, a labor market that is close to capacity is a reason in favor of raising rates. However, economic growth has slowed and there are fears that Brexit will take a toll on the British economy. The deadlock in the Brexit negotiations has done nothing to calm these concerns, as investors and the business community are becoming increasingly frustrated with the government’s lack of a coherent policy regarding Brexit. At the end of the day, a quarter-point rate hike should not have a huge effect on the economy, but the psychological significance of the move could boost the pound against other assets, including gold.

 

XAU/USD Fundamentals

Wednesday (November 1)

  • 8:15 ADP Nonfarm Employment Change. Estimate 202K. Actual 235K
  • 9:45 US Final Manufacturing PMI. Estimate 54.5. Actual 54.6
  • 10:00 US ISM Manufacturing PMI. Estimate 59.5. Actual 58.7
  • 10:00 US Construction Spending. Estimate -0.1%. Actual +0.3%
  • 10:00 US ISM Manufacturing Prices. Estimate 68.0. Actual 68.5
  • 10:30 US Crude Oil Inventories. Estimate -1.5M
  • All Day – US Total Vehicle Sales. Estimate 17.5M
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.25%

Thursday (November 2)

  • 8:30 US Unemployment Claims. Estimate 235K

*All release times are GMT

*Key events are in bold

 

XAU/USD for Wednesday, November 1, 2017

XAU/USD November 1 at 12:50 EST

Open: 1271.21 High: 1280.92 Low: 1267.99 Close: 1277.25

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1213 1240 1260 1285 1307 1337
  • XAU/USD edged higher in the Asian and European sessions. The pair has posted small 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 ratio is almost unchanged on Wednesday. Currently, long positions have a majority (69%), 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.