Gold Slumps to 8-Week Low as Dollar Climbs

Gold continues to lose ground this week. In Tuesday’s North American session, the spot price for an ounce of gold is $1264.55, down 0.90% on the day. In the US, ISM Non-Manufacturing PMI slowed to 57.4, missing the estimate of 59.2 points. On Wednesday, the US releases ADP Nonfarm Employment Change, with several key employment indicators to follow on Friday.

If Republican lawmakers have their way, President Trump will sign a tax relief bill in a few short weeks. The US Senate passed a tax reform bill on the weekend, but the vote was a squeaker, 51-49, as the vote went along party lines, with one Republican voting against the bill. Now that that the House and the Senate have passed tax bills, a conference committee will try and hammer out a uniform bill which can be sent to President Trump and signed into law. There are some differences in the two bills, notably individual tax rates, the alternative minimum tax, mortgage interest deductions and the estate tax. The Senate and House will have to work out their differences quickly, as the new “merged” bill will have to pass through in both houses. If the bill does become law, it will mark the first major tax reform in the US in 30 years, and could boost the US dollar and weigh on gold prices.

The markets are widely expecting the Federal Reserve to continue to raise rates in the near future, and this sentiment continues to weigh on gold prices. The CME has priced in a rate hike for both December and January at 85%, a slight drop from last week, but still at very high levels. If the US economy continues to perform at its impressive pace into 2018, we could see the Fed raise rates up to three times next year.

XAU/USD Fundamentals

Tuesday (December 5)

  • 8:30 US Trade Balance. Estimate -46.2B. Actual -48.7B
  • 9:45 US Final Services PMI. Estimate 55.4. Actual 54.5
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 59.2. Actual 57.4
  • Tentative – US IBD/TIPP Economic Optimism. Estimate 54.6

Wednesday (December 6)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 191K

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, December 5, 2017

XAU/USD December 5 at 12:20 EST

Open: 1276.08 High: 1277.20 Low: 1260.98 Close: 1264.83

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1213 1240 1260 1285 1307 1337
  • XAU/USD posted slight losses in the Asian session. The pair has been flat in the European and North American sessions
  • 1260 is a weak support line
  • 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 unchanged in the Tuesday session. Currently, long positions have a majority (72%), 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.