Gold Recovers, Climbs Above $1200

Gold is steady on Tuesday, as the spot price is at $1205.81 per ounce in the European session. The metal has shown some volatility in the past few days, posting strong gains on Monday after sustaining sharp losses on Friday. On the release front, today’s highlight is JOLTS Job Openings, an important employment indicator. The markets are expecting a slight improvement in the September reading.

Gold prices dropped on Friday after strong US job numbers. Nonfarm Employment change rebounded in September, climbing to 248 thousand. This exceeded expectations of 216 thousand. The unemployment rate dipped to 5.9%, the first time it’s been below the 6% threshold in over six years. With QE slated to end later this month, the focus will shift to the timetable for an interest rake hike. Strong job numbers such as these could put pressure on the Fed to make an interest rate move sooner rather than later. This bodes well for the dollar but not for gold, as market perception of a hawkish Fed is bearish for the precious metal. Gold continues to trade close at low levels, and could lose more ground to the strong US dollar.

At its October policy meeting, the ECB made no changes to interest rates. The central bank did announce it would start buying covered bonds in October and begin ABS purchases in Q4. However, there were no specifics and no mention of any purchase of government bonds. This left the markets underwhelmed by the ECB announcement and the euro remains at low levels. Given that the ECB shows no signs of introducing a full-blown QE, it’s questionable whether ABS will help boost the anemic Eurozone economy.

XAU/USD for Tuesday, October 7, 2014

XAU/USD October 7 at 13:00 GMT

XAU/USD 1205.81 H: 1212.63 L: 1202.96

XAU/USD Technical

• Gold was flat in the Asian session. The pair edged higher earlier in the European session but gave up these gains.
• 1186 is the next support line.
• 1215 is an immediate resistance line. 1240 is next.
• Current range: 1186 to 1215.

Further levels in both directions:

• Below: 1186, 1156, 1136 and 1101
• Above: 1215, 1240, 1252, 1275 and 1300

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Tuesday, continuing the direction seen a day earlier. This is not consistent with the pair lack of movement. The ratio has a majority of long positions, indicative of trader sentiment in favor of gold breaking out and moving higher against the dollar.

XAU/USD Fundamentals

• 14:00 US JOLTS Job Openings. Estimate 4.71M.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.3 points.
• 17:20 US FOMC Member Narayana Kocherlakota Speaks.
• 19:00 US FOMC Member William Dudley Speaks.
• 19:00 US Consumer Credit. Estimate 20.3B.

*Key releases are highlighted in bold

*All release times are GMT

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.