Gold Prices Close to 6-Week Highs

Gold is steady on Tuesday, as the spot price is $1248.16 per ounce in the European session. The metal is trading just shy of $1249.71, which marks a 6-week high. Today’s sole release on the calendar is Existing Homes Sales. The markets are expecting the indicator to improve in the September release.

The US dollar posted strong gains against gold in September and early October, pushing the metal below the $1200 level. However, gold prices have since rebounded close to the $1250 level. Why the renewed appetite for gold on the part of investors? A key reason is that the Federal Reserve has put out signals that it may delay changing its monetary stance and raising interest rates. The Fed has noted that there is still slack in the economy and global economic conditions remain weak. A rate hike is still expected in 2015, but the Fed is unlikely to pull the trigger early in the year. With continuing uncertainty about the timing of a rate hike, gold remains an attractive alternative to the greenback.

US releases wrapped up the week on a high note, as UoM Consumer Sentiment climbed to 86.4 points, its highest reading since July 2007. The markets had expected a reading of 84.3 points. This indicates that the US consumer remains optimistic about the economy and is not overly concerned about warnings of a global slowdown. On the housing front, Building Permits and Housing Starts met expectations. Strong US employment numbers continue to drive the US recovery, as US job claims dropped to 264 thousand, marking a 14-year low. The estimate stood at 286 thousand.

XAU/USD for Tuesday, October 21, 2014

XAU/USD October 21 at 10:35 GMT

XAU/USD 1248.16 H: 1253.78 L: 1244.10

XAU/USD Technical

• Gold continues to move upwards. The pair broke above resistance at 1252 early in the European session before retracting.
• On the upside, 1252 remains fluid. 1275 is stronger.
• 1240 is an immediate support level. 1215 is next.
• Current range: 1240 to 1252.

Further levels in both directions:

• Below: 1240, 1215, 1186, 1156 and 1136
• Above: 1252, 1275, 1300 and 1322

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Tuesday. This is not consistent with the pair’s movement, as gold continues to post gains. The ratio has a majority of long positions, indicative of trader sentiment in favor of gold continuing to move higher.

XAU/USD Fundamentals

• 14:00 US Existing Home Sales. Estimate 5.11M.

*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.