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Gold in Holding Pattern Ahead of Fed Statement

Gold is showing little movement on Wednesday, as the pair has been listless since sharp losses started off the week. In the European session, the spot price stands at $1198.03. In the US, the FOMC will release its policy statement, and we’ll get a look at November CPI. The markets are expecting a small decline of 0.1%.

The Federal Reserve will be in the spotlight on Wednesday, as the FOMC issues its monthly policy statement. With the US economy continuing to grow, the markets are confident that the Fed will take action and raise interest rates in the first half of 2015. One key question is whether the Fed will adjust its forward guidance; that is, will the Fed make use of policy statements to provide the markets with more information about its projections regarding interest rate policy. If this does occur, there will be less uncertainty about the Fed’s monetary policy and this could boost the US dollar against its major rivals.

Gold prices started the week with losses, as the metal shed about 1.8% of its value on Monday, closing at $1198. Gold continues to trade close to the key $1200 level on Tuesday. Why the sharp drop on Monday? One reason is last week’s US numbers, as solid employment and retail sales numbers helped boosted the dollar. As well, the markets are expecting a bullish view of the US economy from the Federal Reserve policy statement on Wednesday.

 

XAU/USD for Wednesday, December 17, 2014

XAU/USD December 17 at 11:15 GMT

XAU/USD 1198.03 H: 1201.67 L: 1194.49

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1130 1156 1175 1200 1215 1240

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Wednesday. This is consistent with the lack of movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards gold breaking out of range and moving to higher ground.

XAU/USD Fundamentals

*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.

Kenny Fisher

Kenny Fisher [4]

Currency Analyst at Market Pulse [5]
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.